TBM Staff - Mumbai
The hospitality sector is witnessing an upcycle, driven by robust domestic demand and favorable demographics, despite a decline in international tourist arrivals. Supply is lagging behind demand, leading to increased investments in infrastructure and connectivity. This trend is pushing average revenue per room (RevPAR) growth to 8-9% in this fiscal year, following a 14% increase last year.
The Industry currently boasts 1,66,000 branded hotel keys, with plans to add 55,000 more over the next five years, representing an annual growth rate of 4.5-5.5%. According to CareEdge estimates, the industry’s RevPAR grew by 14% in FY2024 and is expected to see further growth of 8-9% in FY2025.
The segment mix is increasingly favouring the upper midscale and midscale economy sectors, with over 60% of new supply expected in these categories. This growth is supported by an expanding middle class, a rise in business travel from SMEs, and increased business activity in smaller towns.
Currently, more than 70% of new supply is concentrated in Tier 2 and 3 cities, as hotel owners focus on addressing unmet demand in these emerging markets. Domestic travel and tourism have contributed around 5% to GDP over the past five years. With continued government support, the sector is projected to grow 8-9% annually, reaching USD 500-530 billion by FY34.
