One of the best times for hotel operators in the last 10 years will be the second half of FY24

JM Financial Institutional Securities predicted that the second half of FY24 will be one of the best for hotel firms in the previous ten years as a result of the Cricket World Cup, the Miss World 2023 pageant’s conclusion, and a good wedding season.

We still believe that occupancies and ARR can increase in the future, but there may be short-term setbacks to an otherwise compelling story, such as the high base of FY24E, the upcoming general elections in May, the potential risk of the IPL leaving India, and an unfavorable mix caused by a higher share of corporate travels that may bring occupancies and ARR closer to pre-Covid levels.

We anticipate occupancy to nudge up to 70–72% in 2HFY25E as the underperforming demand segments (corporate travel and inbound tourism) come to the fore, leading to low double digit ARR growth during this period adjusted for extremely high rates during the ODI matches in respective venues, according to the report.

For the universe we cover, we anticipate ARRs to expand at a slower pace of 6–8% in FY25E (compared to 10% in FY24E), and we anticipate an increase in EBITDA margins of 100–150 bps due to favorable operational leverage.

On the strength of robust domestic visitor demand and significant international events, the domestic hotel sector is on course to post decadal high figures in 3Q/4QFY24. In FY24E, ARR is predicted to increase by 15% to 20% YoY. According to the research, growth in FY25E should be moderated as a consequence of the high base of FY24E.

Additionally, occupancy and RevPAR decreased by 0.4% and 2.9% YoY in 1QFY20, the most recent general elections, respectively.

We anticipate a similar scenario, which would temporarily hamper growth, in the beginning of FY25E. According to the research, hotel prices would be under pressure as business sector demand (and specifically rates negotiated via RFPs) returned to the revenue mix.