New Delhi [India], December 12 (ANI): Demand for branded hotel rooms in India is set to grow faster than supply over the next five years, according to a report by YES Securities. The report said that overall
branded room demand has grown at a compounded annual growth rate (CAGR) of 7.6 per cent in the past decade. This pace grew to 21.4 per cent CAGR between FY22 and FY25. The momentum is expected to continue, with demand likely to rise at 10.4 per cent CAGR during FY25-30, outpacing supply growth projected between 8 per cent and 9 per cent. Mid-premium and economy hotels are expected to see the most expansion, with supply likely to grow between 9 per cent and 11 per cent CAGR across various sub-segments. Cities such as Amritsar, Chandigarh, Dehradun, Lucknow, Navi Mumbai, Noida, and Udaipur are among the key growth centers. However, the report warned that some of these markets may experience temporary oversupply, leading to increased competition and pressure on revenue per available room (RevPAR). The report adds, the active development pipeline (projects currently under construction) stands at 78 per cent of the proposed supply as of FY25, indicating that some of the planned inventory may not materialize soon. Based on ongoing projects, the actual supply growth may remain around 7.7 per cent CAGR over FY25-30E, with metro markets adding at just 4.6 per cent. YES Securities said the imbalance between demand and supply should support steady improvement in both average room rates (ARR) and occupancy levels over the medium term. While overall room supply is estimated to grow at 9.6 per cent CAGR in FY25-30E, the top 20 markets are expected to see slower expansion at 6.9 per cent. Growth in metro markets is even more modest at 5.4 per cent, led by selective additions in Bengaluru (8.7 per cent), Hyderabad (6.1 per cent) and Kolkata (5.9 per cent). In contrast, cities such as New Delhi (2.5 per cent), Pune (3.2 per cent), Chennai (4.4 per cent) and Mumbai (5.4 per cent) are likely to see limited new supply. The report highlighted that the luxury segment will remain constrained, with supply rising at only 5.6 per cent CAGR, forming about 5 per cent of total upcoming rooms. Nearly three-fourths of new luxury rooms are coming up in the top 20 markets, and almost half of these are concentrated in metro cities. Despite limited additions, demand in the luxury segment has been strong, suggesting continued growth in ARR and occupancy. The slower expansion, the report noted, stems from high capital costs, regulatory hurdles, and scarce prime land. (ANI)
