The Indian Government is focusing on domestic tourism by creating facilities at religious sites and tourist destinations, such as hotels and dharamshalas and better road/rail/air connectivity. It is developing tourist circuits like the Ram Yatra, Budh Circuit, etc. Religious places like Varanasi, Mathura, Vrindavan, Ayodhya and Tirupati are seeing a major infrastructure boost and improved connectivity. This has resulted in increased domestic tourism.

Hotel boom

The Indian hotel industry has also come of age with a host of upgraded and quality hotels in tourist and religious destinations across India. Recently, over 10 five-star hotels have been announced in Ayodhya.

The hotel industry is witnessing a revival post COVID. Tourists are flocking to hotels and business travel has also grown. This is evident by the room rent and occupancy ratio. Room rents have grown by over 25 to 50 per cent in the past two years and the occupancy ratio has improved from 34.1 per cent in CY21 to 66.7 per cent in CY 23 and is set to grow to 70 per cent in CY24. The occupancy ratio has breached pre-COVID levels with strong growth prospects.

Further, the number of hotel rooms has grown across India. Room inventory is poised to grow from about 159,000 keys to over 200,000 keys in the next five years. The hotel industry is estimated to grow by 10-15 per cent in the next few years. The entire supply of rooms is being absorbed by business travellers and tourists.

The airline industry, too, is growing – from 142 million pre-COVID passengers to 154 million in FY24, which is testament to increased business and tourist travel in India. Indeed, the hotel industry has been delivering good results. The listed hotels’ ARPU has grown by more than 15-20 per cent with an increase in occupancy rates to over 70 per cent. This has resulted in higher revenue for the industry and a consequent increase in the valuation of hotel industry stocks (See growth in valuation of hotel industry stocks).

-Vijay Agrawal, Director, Equirus Capital