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All demand drivers in a sweet spot

We expect India’s hotel industry to clock in 12-15% RevPAR growth YoY in Q4FY24E; this is likely to be driven by a 200bp improvement in occupancy and a double-digit rise in average room rate (ARR). Healthy economic growth, robust demand for meetings, incentives, conference and events (MICE), scheduling of various events, high double-digit growth in foreign tourist arrivals and ~5% growth in domestic passenger traffic were key drivers for Q4.

Robust demand and dynamic pricing driving business travel

Strong economic growth (in the range of 6.5-8.0% in Q4FY24E) as well as MICE have been key demand drivers for business destinations. We expect ARR growth to be ~15% in Q4FY24E, driven by dynamic pricing. The Miss World Contest, various pharmaceutical events & conferences, Ed Sheeran and IPL are among the key events that took place in Q4

New hotel openings up 26%; signings rise 35%

According to HVS Anarock, the industry has seen 26% growth in new hotel openings to 146 but a 10% decline in room additions to 9,833 between April 2023 and February 2024. With regards to new hotel signings, the industry has seen a 35% increase in new hotel signings to 289 in FY24 YTD, leading to a 54% rise in new room additions to 28,139.

DB Realty to demerge its hotel assets and separately list it

DB Realty (DBRL IN, CMP: INR 206, Not Rated) will transfer its hospitality business to a new wholly owned subsidiary called Advent International by way of a demerger (Source: Stock Exchange Filing). Advent International is set to be listed on the stock exchanges. The hospitality business has 484 rooms under operations and 3,036 in pipeline at Goa, Delhi and Mumbai, which are expected to be operational during FY26- 30.

Outlook: Both leisure and business travel to drive demand

Strong leisure and growing business travel will continue to accelerate ARR growth and increase occupancy. With the opening of the Lord Ram temple at Ayodhya in Utter Pradesh, religious tourism (leisure) has gotten a leg up. New hotel signings show an accelerated trend. The macroeconomic environment for India remains robust, which is expected to sustain demand for the hotel industry. Juniper Hotels is our top pick in the sector.

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