India's Hospitality Sector Poised for Growth Amid Luxury Demand Surge
India's hospitality sector enters a 'golden cycle' as luxury demand outpaces supply: Nomura
The Economic TimesImage: The Economic Times
India's hospitality sector is entering a promising phase with sustained growth in average daily rates (ADR) and strong returns driven by a significant demand-supply gap in luxury hotels. The sector is expected to attract more investment as affluent spending and corporate travel rise, particularly in major cities like Delhi, Mumbai, and Bengaluru.
- 01India's hospitality sector is experiencing a 'golden cycle' with rising average daily rates (ADR).
- 02Luxury hotel supply is projected to grow at only 6-7% annually, while demand is expected to increase at a high-single to low-double-digit pace.
- 03The depreciation of the Indian rupee is making hotels more appealing to international tourists.
- 04Nomura estimates attractive mid-teen internal rates of return (IRR) for hotels in India.
- 05Valuations in the sector have stabilized, making it a compelling investment opportunity.
Advertisement
In-Article Ad
India's hospitality sector is entering a 'golden cycle' characterized by significant growth in average daily rates (ADR) and attractive investment returns, according to Nomura Asian Equity Research. The report highlights that while the supply of luxury hotels in key cities like Delhi NCR, Mumbai, and Bengaluru is projected to grow at only 6-7% annually due to high entry barriers, demand is likely to expand at a high-single to low-double-digit pace, fueled by increased spending from affluent Indians and corporate travel. The depreciation of the Indian rupee is further enhancing the appeal of Indian hotels to international travelers. Nomura's analysis indicates that Indian hotels remain under-penetrated compared to other Asia-Pacific cities, presenting a strong investment case. The brokerage estimates internal rates of return (IRR) for hotels in India to be attractive at mid-teen levels, supported by improving demand-supply dynamics and pricing power. Current sector valuations have cooled to 18x EV/EBITDA for FY27 and 15x for FY28 estimates, comparable to levels seen during previous industry downcycles. This stabilization, along with a projected 15% compound annual growth rate for EBITDA over FY26-28, indicates a promising outlook for investors in the hospitality sector.
Advertisement
In-Article Ad
The growth in the hospitality sector is likely to lead to increased job opportunities and economic benefits in urban areas, particularly for those involved in tourism and hospitality services.
Advertisement
In-Article Ad
Reader Poll
Do you believe that the luxury hotel segment in India will continue to grow?
Connecting to poll...
Read the original article
Visit the source for the complete story.
