Hospitality RevPAR growth set to improve

Chennai: Despite the slowdown in the economy, hospitality sector is expected to receive support from the positive momentum in the commercial real estate market.

Since demonetisation, the growth in Revenue per Available Room (RevPAR) had dropped from 5.5 per cent in 2016 to 1.9 per cent in 2018. Despite the current slowdown in the economy and subdued consumer demand, the hospitality sector has witnessed RevPAR growth of 2.6 per cent in the June quarter over the same quarter last year.

“This deviation from economic behaviour can be attributed to the commercial real estate market, which has witnessed a 20 per cent growth in office stock absorption and 1 per cent decline in vacancy rates across the top seven business cities in India. This gives the hotel industry hope in 2019 moving into 2020, so long as the services sector continues to drive growth in the commercial office market in major cities,’ finds JLL India.

The positive outlook of the government on revival of GDP growth and maintaining inflation at targeted level gives the economy as well as the hospitality industry a ray of hope. With the latest reduction of GST from 28 per cent to 18 per cent applicable on room rates above Rs 7,500 per night will provide a great fillip to the premium and luxury hotel sector. Other hotels too benefit as those with tariff in the range of Rs 1,000-7,500 will be taxed at 12 per cent and tahose below Rs 1,000 have been exempt from the tax regime.  

India Ratings and Research too believes the GST Council’s decision to reduce GST rate on hotel tariffs among different tariff buckets, will aid in improving occupancy rates and consequently Ebitda margins in the short-to-medium term.