India’s hotel industry is expected to see significant growth, with earnings projected to increase by 16 to 21 percent over the next three years. This growth will be driven by rising room rates and improved occupancy levels, according to a report by HSBC Global Investment Research. The report forecasts a robust compound annual growth rate of 16 to 21 percent in industry-wide EBITDA from FY25 to FY28, supported by an annual room rate growth of 5 to 7 percent.
Improvements in occupancy levels in key urban and leisure markets, along with the addition of high-margin managed room inventory, are expected to contribute to this growth. Additionally, revenue from events such as corporate gatherings and weddings, which account for 30 to 45 percent of sector revenue, will play a significant role. EBITDA margins for companies covered in the report are also projected to expand by an average of about 140 basis points over the next three years.
The growth in EBITDA margins will be driven by factors such as traffic mix improvement, operational efficiencies, and a shift towards managed room inventory, which is typically a high-margin business. The industry is currently experiencing strong and sustainable demand, with room rates on the rise for four consecutive years and occupancy rates at record highs. Despite geopolitical tensions and weather disruptions, valuations in the sector remain reasonable, presenting a buying opportunity.
According to the report, India’s hotel industry is facing a situation where demand is outpacing supply, leading to a favorable market for hotel operators. The CEO of Hilton Hotels highlighted India as the most significant opportunity in the global hospitality industry for the next few decades. With undemanding valuations, strong fundamentals, and growing tourist numbers, the industry is poised for continued success.
