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Crisil Ratings in its latest report has said that the Indian hotel industry is likely to witness 23 per cent growth in revenue this fiscal (FY23) over the pre-pandemic level, driven by a strong recovery in business travel and continued traction in leisure travel. Higher average room rates (ARRs) and occupancy will help the hotel industry log a strong improvement in profitability to around 34 per cent this fiscal compared to 24 per cent in the pre-pandemic period (fiscal 2020).

According to the report, leisure travel had gained traction post the Delta wave last fiscal, while business travel has started picking up steadily after a much milder Omicron wave in January 2022. This has been fuelling demand in the MICE (meetings, incentives, conventions and events) segment. It believes that improvement in international business travel in the second half of this fiscal will strengthen the industry's performance.

The report further said occupancy will rise to 73 per cent this fiscal (68 per cent in fiscal 2020), while average room rate (ARR) should increase 8-10 per cent. It said that the gap between demand and supply will aid the improvement in ARR. It noted that developers had held back on capex amid the pandemic-induced uncertainties, and while the sharp rebound in demand may spur an increase in capex, supply will take a while to catch up because of the long gestation period for setting up a greenfield hotel that will favour existing hotels.