Hotel industry revenues to grow 9-10% in 2016-17

The country's hotel industry revenues are likely to improve by 9-10 per cent in 2016-17, mainly aided by improved occupancy, rating agency ICRA said.

 It estimates the topline growth for the industry to be 8 per cent during 2015-16. The pan-India average room rate (ARR) will be flat for 2015-16, but occupancy improvements of 6-7 per cent supports revenue per available room (RevPAR) growth of 7 per cent, it said in a report.

Room inventory in the premium category is estimated to increase by 8 per cent for 2015-16, compared to 4 per cent during 2014-15. With deferment in construction, supply addition would be lower than earlier estimates at 7.7-8 per cent for 2016-17.

Domestic travel, going by domestic airline revenue passenger kilometre (RPKM) trends exhibited strong growth during the past 12 months indicating improving consumer confidence, it said.

However, given the muted global economic outlook, foreign tourist arrivals (FTAs) growth for CY2016 is expected to be subdued. FTAs slowed down to 4.4 per cent during calendar year 2015 (7.1 per cent during 2014). FTA segment continues to remain far below its true potential, ICRA report pointed out.

Further, it said, the per capita dollar spend by tourists declined sharply in 2015 after remaining stagnant for three years.

While improving consumer confidence has supported growth in occupancies, ARRs also appear to have bottomed out and were marginally down during YTD Dec-2015.

Revenues for the industry sample grew by 7 per cent in Q2, 2015-16, due mainly to occupancy driven RevPAR growth, while cost control measures bumped up operating margin by 250 bps to 8.8 per cent.