Demand in Indian hospitality sector to outpace supply over next 3-4 years: Report

New Delhi [India], February 23 : The demand in the Indian hospitality sector will outpace supply over the next three to four years, as the sector witnessed a sharp rebound post-pandemic and recorded a outstanding performance over the past three years, according to a report by Yes Securities.
"We believe the uptrend is likely to continue over the next 3 years, though the increase will be more gradual. This is because of sustained momentum in demand, which is expected to outpace supply growth. At an industry level, over FY24-29E, demand is expected to grow at a CAGR of 10.4 per cent vs. a supply CAGR of 9 per cent," the report added.
Explaining the rationale behind the optimism, the report added that the sector has experienced a significant post-pandemic rebound, driven by the revival of both domestic and international tourism, as well as strong demand from the Meetings, Incentives, Conferences, and Exhibitions (MICE) sector which is likely to maintain the pace.
This growth has resulted in a sharp increase in Average Room Rates (ARRs) and occupancy levels, the report says.
It adds that the sector is expected to be in a long-term upcycle, supported by shifts in consumer preferences, rising disposable incomes, and increased travel spending.
The report highlighted that over the next few years, demand is projected to outpace supply, particularly in the markets where supply growth is constrained.
As per the report, luxury and upscale segments, which currently make up about 56 percent of existing supply, will likely see increased demand, contributing to higher ARRs and occupancy levels.
The overall industry is expected to grow at a Compound Annual Growth Rate (CAGR) of 10.4 per cent from FY24 to FY29, outpacing supply growth at 9 percent, the report says.
As per the report, the MICE demand is also expected to grow, supported by India's rising global significance and new infrastructure like convention centers in cities like Mumbai, New Delhi, and Jaipur.
These developments will boost demand for both rooms and event spaces, further enhancing the hospitality sector's performance, the report adds.