MUMBAI: The hospitality sector is currently on an upcycle, driven by favorable demographics, robust domestic demand with supply lagging behind demand despite international tourist inflows falling. The rising investments with ongoing improvements in infrastructure and connectivity, helping to close the fiscal with an 8-9 per cent growth in average revenue per room, on the back of a 14 per cent growth last fiscal.
There are around 1,66,000 branded hotel keys and over the next five years, the industry is expected to add 55,000 keys more, logging in an annualised growth rate of 4.5-5.5 per cent this period.
According to a Careedge estimate, the industry's revenue per available room (RevPAR) grew 14 per cent in fiscal 2024 and the same is expected to clip at 8-9 per cent this fiscal.
According to the agency, the segment mix is shifting towards upper midscale and midscale economy, with over 60 per cent of the new supply are expected to be added in these segments.
This segmental growth is driven by several factors, including a growing middle class, a significant uptick in business travel, especially from small and medium enterprises, and an expanding scope of business activities small towns.
Currently, over 70 per cent of the proposed supply is concentrated in tier 2 & 3 cities, followed by tier 1, as hotel owners and operators explore opportunities to capture unmet demand in emerging and underserved markets.
Over the past five years, the domestic travel and tourism sector has contributed around 5 per cent to the gross domestic product. This has given the government emphasis on the sector, the travel and tourism industry is projected to grow by 8-9 per cent annually, reaching a total value of USD 500-530 billion by FY34, according to the tourism ministry estimates.