Hoteliers that benefitted from a revenue surge in the first half of the fiscal year are looking for an encore in the second, fuelled by robust room rates and wedding season demand.
Top names such as East India Hotels (EIH), which operates Oberoi hotels and resorts, Indian Hotels Co. Ltd, which operates Taj hotels and resorts, Lemon Tree Hotels, Chalet Hotels, and Samhi Hotels increased their revenues by 8% to 26% in the first half of FY25. Even though occupancies declined marginally, hopes are high for the quarters ahead.
Upcoming highways and airports indicate greater travel and room demand in future, Lemon Tree Hotels chairperson and managing director Patanjali G. Keswani said.
“There will be a gradual growth in people’s aspirations to move towards more branded hotel rooms. This will lead to a long-term structural shift in demand for hotels, which will be cyclical. In the coming years, many hotels will get repriced (or increase their average room rate per night). By and large, business hotels, especially those in big cities, will do better than leisure hotels,” he said.
Hotel occupancies in October fell countrywide both annually and sequentially, a recent report from hospitality consultancy HVS showed. This seasonal dip is typical of the holiday period across the country. However, average room rates (ARRs) rose 6% year-on-year, reflecting pricing strength. Nationwide, ARR was ₹8,000-8,200, a 30-32% increase from the same period in 2019. Occupancy rates were 58-60%.
“Historically, Q4 tends to be the strongest quarter due to high demand from weddings and holiday season,” said Jaideep Dang, managing director, hotels and hospitality group, India at JLL, a property consultant. “Also, this year, we have seen a huge spurt in music concerts, entertainment shows and large-scale exhibitions, which have further fuelled demand towards the end of this year. As a result, we believe this financial year is expected to set new records for performance of the hotel industry,” Dang added.
Ahmedabad recorded a significant increase in occupancy, driven by the Navratri festive season. However, the city also saw a notable correction in ARR, with rates dropping more than 30% compared to October 2023, when the city experienced a surge due to the ICC Cricket World Cup. Meanwhile, cities such as Bengaluru and Kochi saw stable occupancy, while Chennai, Kolkata, and Mumbai experienced the steepest declines in occupancy, ranging from 3 to 5 percentage points.
“On a same-store basis, we have seen a growth of about 11% year-on-year till the last quarter. It has been very consistent for us, and we expect to maintain an early double-digit growth in our Ebitda throughout the year. The third quarter has been good so far as well, and we have no reason to believe this growth will slow down next year. For all of FY26, we do expect an early double-digit growth,” said Ashish Jakhanwala, chairman, managing director and CEO of Samhi Hotels which owns about 35 properties.
Even with lower occupancies, high wedding season demand will hoteliers, experts said.
“The hotel business is now being largely powered by strong and consistent ARRs,” said Rattan Keswani, a hospitality veteran with leadership experience at Lemon Tree and EIH. “Though occupancies have slipped a little, rates remain strong across the board,” Keswani added, highlighting that most listed companies continue to benefit from strong demand during peak wedding seasons.
Meanwhile, approximately 120 new hotels opened across the country in the first 10 months of 2024, adding around 8,100 rooms. The majority of them were concentrated in tier 3 and tier 4 cities, reflecting the ongoing trend of expanding hotel capacity into smaller cities and emerging locations. In a recent report, ratings agency Crisil Ltd estimated that the gross revenue of the hospitality sector will grow from ₹25,650 crore in FY25 to ₹28,800 crore in FY26. The agency used a ratings analysis of 52 branded hotels to arriveatthisfigure.
“The growth story of many individual hotel companies has been very strong for the last year or so, and that’s the wave we’ve all been riding. Not much has changed in terms of growth in the last one year. The demand for hotels seems very strong. This year, we are seeing strong growth in the wedding business. If we were to exclude G20 from the same period last year, then the event-based growth is still very strong, especially in the second half of this year,” said Chalet’s managing director and chief executive Sanjay Sethi.
Rattan Keswani said lower occupancy could be attributed to weaker demand from key sectors like IT and consumer goods companies, which traditionally fuel conferences and training events. “These sectors have been a bit quieter, reducing demand for event space and rooms,” Keswani explained. “But weddings have continued to buoy the market, providing much-needed demand. It’s not uncommon for weddings alone to bring in ₹30-40 lakh in revenue, with rooms contributing significantly to that figure.”
While consumers have shown resistance to rising hotel rates, they have continued to pay them. Keswani pointed out that more affluent travellers understand that the increase in room rates is a reflection of inflation and the stronger US dollar. However, he noted that there is a threshold: “Consumers are comfortable paying ₹8,000-8,500 per night for a five-star hotel. But once rates exceed ₹10,000 per night, that becomes a subject of discussion.”
Despite the slight dip in occupancy rates during certain periods, the overall outlook for the hotel sector remains strong. As the industry adapts to shifting patterns in consumer demand and economic factors, the balance between room pricing, occupancy, and profitability will continue to be a crucial factor for hotel companies looking to navigate the evolving hospitality landscape in India.
