Indian hospitality sector set for strong Q4 growth led by spiritual tourism like Mahakumbh

The Indian hospitality industry is poised for another strong quarter in Q4FY25, driven by robust demand from MICE (Meetings, Incentives, Conferences, and Exhibitions) activities, cultural events, and an active wedding season, according to Motilal Oswal report.

According to recent industry checks, key hospitality players are expected to witness 12-14 per cent year-on-year (YoY) growth in Revenue Per Available Room (RevPAR), similar to Q3FY25. This growth is primarily attributed to an 11-13 per cent increase in Average Room Rate (ARR) and higher occupancy levels.

The momentum gained in Q3FY25 is carrying forward into January and February 2025, with leading hospitality players experiencing sustained demand. Cities such as Mumbai and Delhi NCR are projected to continue their strong performance, supported by an extensive line up of MICE and cultural events.

Business activities in key metros like Bengaluru, Hyderabad, and Pune are also on an upward trajectory, benefiting from a decline in holiday breaks and steady corporate demand.

Spiritual tourism is another key growth driver, especially with the Mahakumbh in Prayagraj fueling a surge in bookings. Hotels, Dharamshala, and homestays in the region are witnessing a 300 per cent rise in bookings, generating approximately Rs28 billion for the hospitality and travel industry.

Major Indian hotel chains have expanded their presence across 60 spiritual cities, with plans to add over 2,800 new rooms in locations like Ayodhya, Hampi, Vrindavan, Ujjain, and Prayagraj over the next three to five years.

As of early 2024, around 5,700 branded hotel rooms were available in religious tourism hotspots, with an additional 4,700 expected in the next four to five years.

The overall industry outlook for Q4FY25 remains positive, bolstered by favourable supply-demand dynamics and corporate rate hikes, leading to increased ARR and occupancy.

Additionally, contributions from newly added hotel inventory, stabilization of key properties, and the reopening of renovated hotels with expanded capacities are expected to further strengthen earnings for major hospitality companies.

The continuation of a strong wedding season and large-scale events in Q4FY25 will play a crucial role in sustaining sector's growth momentum.

Industry experts anticipate that RevPAR growth of 12-14 per cent will remain in line with Q3FY25, with January and February witnessing high occupancy rates alongside double-digit ARR growth.

Government initiatives announced in the Union Budget 2025 are set to further propel the hospitality sector. The central government's plan to develop 50 major tourist spots, with a focus on spiritual and medical tourism, in collaboration with state authorities is expected to open new growth avenues. Additionally, streamlining the e-visa process for select foreign tourist groups is anticipated to accelerate the recovery of Foreign Tourist Arrivals (FTAs).

Furthermore, the depreciation of the Indian rupee against the US dollar (~2 per cent YoY in Q3FY25) has made India a more cost-effective destination for foreign travellers. This factor, combined with an expanding network of world-class hotels, is likely to boost international tourist arrivals, potentially surpassing pre-COVID levels in the near term.

Leisure destinations like Goa are also witnessing steady occupancy rates, with ARR gradually rising due to an increase in discretionary spending, aided by tax relief measures in the Union Budget.