COIMBATORE: The outlook for the Indian hotel industry is expected to remain subdued given the gap between supply and demand over the next 12-18 months, ratings agency ICRA has said.
However, measures taken by the Union government to drive tourism through several strong policy initiatives could bring in stronger demand, supporting the industry, it said.
According to ICRA Research, India has over 29,000 premium rooms under construction to be launched over the next six years.
Though there is a general perception of supply growth having eased, inventory accretion across the 12 key cities that ICRA's premium room database tracks estimates a 10% increase for 2014-15, closely following the 11% addition experienced in 2013-14.
Domestic demand is expected to grow by over 10% driven by both business and leisure travellers during 2014-15. However, falling global economic sentiments have affected inbound travel and with a booking window of 8-12 months for Western leisure travel, the impact is expected to be felt in 2015-16 as well, ICRA said.
The drop in oil prices has also impacted inbound travel, particularly witnessed in the marked drop in Russian tourists visiting Goa's sunny beaches to escape the frigid winter conditions back home, it said.
Revenues for the industry would grow by 5%-6% for 2014-15 largely driven by incremental rooms and food and beverage income, the agency said.
Growth is expected to accelerate to 9%-12% over the next two years. Average room rates (ARRs) are expected to be largely flat while occupancies are estimated to improve by 2%-4% during 2014-15.
Though industry occupancy levels have witnessed improvement in the current fiscal, it has been geographically concentrated in pockets such as Mumbai, ICRA stated.
There has been a lack of traction in ARRs even in places such as Mumbai, which has been maintaining a steady discount on a year-on-year basis, it said.
However, ICRA expects that easing visa and policy norms will support inbound travel into India even as a weaker global economy curtails traveller budgets. Foreign tourist arrivals growth increased from 5.9% in 2013 to 7.1% during 2014.
The Source : The Times of India