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Hotel room revenues swinging upwards, but still below their highs of 2007

After two years of steady growth in occupancy rates, revenue per available room is on an uptrend. (Naveen Kumar Saini/Mint)Premium
After two years of steady growth in occupancy rates, revenue per available room is on an uptrend. (Naveen Kumar Saini/Mint)

  • India-wide revenue per available room (RevPAR) in 2018 grew 9.6% over 2017 to 3,927 but still 29% below the boom period in 2007
  • Investor sentiment has improved as RevPAR assures better revenue and profit growth than a mere increase in occupancy rates

There is a much to cheer for the hotel industry in India. After two years of steady growth in occupancy rates, revenue per available room (RevPAR) is on an uptrend.

India-wide RevPAR in 2018 grew 9.6% over 2017 to 3,927, according to a detailed study on hotel trends by global hospitality consulting firm HVS and Anarock Property Consulting Pvt. Ltd.

However, the 2018 RevPAR is 29% below the boom period in 2007.

The good news is that the trend of rising revenue continues. In the past decade, the industry suffered because of excess supply. Over the last two years, hotel supply grew 3.7% and 3.5%, respectively, while demand grew at a more robust 7% and 6.8%.

“After a long hiatus, the industry-wide average daily rates in 2018 grew faster than the long-term inflation rate of 4.5%, suggesting that markets are now on a steady path to recovery," adds the study.

Unsurprisingly, investor sentiment in the sector has improved as RevPAR assures better revenue and profit growth than a mere increase in occupancy rates.

Even international luxury hotel chains are showing greater interest in investing in India compared to a few years ago. Besides, rebranding and brownfield expansions continue to be important for hotels.

That said, growth may stutter a bit in 2019 because of the general elections, when leisure and business travel may be sluggish. However, all the pointers indicate that 2020 could showcase a sharp ramp-up in fortunes of hotel companies. What cannot be ignored, however, is the stiff competition to luxury chains from mid-scale hotels and new hospitality trends such as OYO, Treebo and Fab Hotels. This may weigh on RevPARs. Looks like the ramp-up to the levels seen during the boom may still be a while away.

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