New Delhi: The hospitality sector in India is poised for significant growth, projected to achieve a Compound Annual Growth Rate (CAGR) of 10.5 percent over the forthcoming three years, as outlined in a recent sectoral report by Axis Securities.
This anticipated growth is expected to generate an annual incremental demand of Rs 8,200 crore, the report further elucidated. The driving forces behind this expansion are domestic travelers, international tourists, and the Meetings, Incentives, Conferences, and Exhibitions (MICE) segment. The limited availability of luxury accommodations suggests a robust demand and a trajectory of expansion in the near future, based on the observations made.
According to the report, the current hospitality industry in India encompasses a total of 212,000 rooms, equating to an industry size valued at Rs 82,000 crore. It is projected that domestic tourists will account for approximately 50 percent of the industry's growth, with foreign tourist arrivals expected to contribute 30 percent of the incremental demand, and the MICE segment likely contributing the remaining 20 percent.
"These factors are anticipated to remain sustainable over the next three years and will play a pivotal role in driving sector growth," the report concluded.
The demand for hotel services continues to surpass supply, as the hotel sector is experiencing elevated demand but is struggling to meet this demand.
Citing a report by Hotelivate Research, it was noted that demand is projected to grow at a Compound Annual Growth Rate (CAGR) of 10.8 percent annually, whereas the overall supply is expected to increase by 8 percent.
By 2027, the hospitality sector is projected to accommodate 241,000 rooms, an increase from the current figure of 188,000. The report estimates that an additional 18,000 rooms will be added annually from 2024 to 2027.
It was highlighted that the demand within the hospitality sector is not confined to metropolitan or Tier 1 cities alone; Tier II and III cities are also experiencing a robust demand. These Tier II and III cities are witnessing a 13 percent annual growth in demand, albeit at a slower pace of supply growth of 10 percent.
"Enhanced road connectivity and expanded railway networks are fueling growth from rural to urban areas, thereby further augmenting demand. The Indian hotel industry is strategically positioned to leverage these trends, significantly contributing to the tourism sector and the broader economic growth," the report added, citing the factors that support the demand.
Moreover, the analysis observed that despite an average annual addition of roughly 18,000 rooms, the six leading players in the sector contribute to approximately 30 percent of the total annual increment. This cautious and stable approach is attributed to the market size expanding at a faster rate than the rate at which industry leaders are adding new rooms.
