Increase in domestic middleclass consumer spending stabilises hospitality industry?

The hotel industry has been more sensitive to the economic cycles, accentuated both by demand and supply. The Indian hotel industry, over the past nine years, has been in a state of flux, starting from FY08 peak through FY10,a pickup in FY11 and downhill in FY15-16. After strong headwinds from an unfavorable demand, and excess room inventory, the situation has improved over the past 12 months, with the pace of room addition slowing down, and due to domestic demand increasing significantly.

Domestic tourism segment has seen growth in last 12 months, which was 81%. It is further expected to witness a CAGR of 4% till CY2024. This expansion is expected on the back of significant increase in spending by the middle class, and in this segment particularly, the share of consumers who earn $4k-$20k has increased in last 16 years from 18 per cent in CY2005 to 43 per cent in CY2016 as compared to total consumer spending. It is further expected to grow to 60% till the end of CY2025.

It is expected that the middle class spending category will grow at a CAGR of 16% by CY2024 as compared to industry which is expected to grow at CAGR of only 12 per cent, and if this scenario continues, we can expect a stable & robust growth in the hospitality industry.