ICRA estimates pan India Average Room Rates (ARR) to remain flat for 2015-16, nevertheless occupancy improvements of 6%-7% supports Revenue per available room (RevPAR) growth of 7%. Room inventory in the premium category is estimated to increase by 8% for 2015-16 as compared to 4% during 2014-15. With deferment in construction, supply addition would be lower than earlier estimates at ~7.7%-8% for 2016-17.
Foreign Tourist Arrivals (FTAs) slowed down to 4.4% during Calendar year 2015 (7.1% during 2014); the FTA segment continues to remain far below its true potential. Further, per capita dollar spend by tourists declined sharply in 2015 after remaining stagnant for three years. Given the muted global economic outlook, FTA growth for CY2016 is also expected to be subdued. Domestic travel, going by domestic airline Revenue Passenger Kilometre (RPKM) trends exhibited strong growth during the past 12 months indicating improving consumer confidence.
ICRA estimates the top line growth for the industry to be ~8% during 2015-16, with operating margins expanding by 100 – 150 bps. Growth would improve in 2016-17 to 9%-10% aided by pickup in occupancies and ARR traction in a few markets like Mumbai.
While improving consumer confidence has supported growth in occupancies, ARRs also appear to have bottomed out and was marginally down during YTD Dec-2015. Revenues for the industry sample grew by 7% during Q2, 2015-16 majorly due to occupancy driven RevPAR growth, while cost control measures bumped up operating margin by 250 bps to 8.8%.