This growth has surpassed the services sector’s average deployment of 23.6 per cent.
In October, the tourism, restaurant, and hotel industries in India witnessed a remarkable 11.7 per cent year-on-year surge in credit deployment, reaching ₹76,413 crore from the previous year’s ₹68,396 crore, according to Reserve Bank of India’s latest data. This growth has surpassed the services sector’s average deployment of 23.6 per cent, underscoring the robust financial activity in these crucial sectors.
Interestingly, within this fiscal year alone, there has been a substantial 10 per cent rise, reflecting not only an increased inflow of investments but also a significant impact on the total outstanding credit extended by 40 scheduled banks to the hotel, travel, and restaurant industries.
This surge in credit deployment can be attributed to the rising disposable income driving substantial growth in India’s tourism industry. According to VIDEC research, travel, tourism, and F&B have emerged as the top discretionary spending areas for Indian consumers. Notably, there is a growing preference for shorter leisure trips among Indian travellers. This shift in consumer behavior has contributed to a surge in demand during Q3 FY23, marked by a 30 per cent year-on-year increase in domestic air passenger traffic, reaching an impressive 113 million in Jan-Sep 2023. This demand spike can be attributed to festive seasons and major events like the ICC World Cup and G20 Summit.
Supply additions, deferred due to the disruptions caused by the Covid pandemic, gained momentum during fiscals 2022 and 2023. However, the industry faced challenges during the peak of the pandemic, leading to demand erosion and putting pressure on the liquidity of hotel owners. Single property owners, in particular, felt the strain, leading them to consider closures, repurposing, or rebranding of their properties, according to a CRISIL report.
Anand Kulkarni, Director at CRISIL Ratings Ltd, is optimistic about the hospitality sector’s growth. He anticipates a robust revenue growth of 15-17 per cent this fiscal year, supported by healthy domestic demand in both business and leisure travel, surpassing pre-pandemic levels, and expects to grow 14-16 per cent year-on-year. While international travel remains below pre-pandemic levels, it is gradually improving, providing an additional boost to hotel demand.
Virendra Jain, co-founder of VIDEC Consultants, observes a robust growth trajectory in the travel and hospitality sector, driven by increased domestic travel spending, recovery in international tourism, and the impact of significant events hosted by India in 2023. This positive momentum is expected to continue, supported by augmented demand, improved operating metrics, and enhanced capacity.
Hotel demand is expected to maintain double-digit growth in the coming years. Strong demand, coupled with heightened service expectations, is driving suppliers to invest in capacity and service quality, fostering an increased credit appetite. VIDEC estimates the Gross Booking Value (GBV) of the Indian hotel market at ₹88,000 crore in FY23, doubling from FY22, with a projected 13% year-on-year growth to ₹1 lakh crore by the end of FY24.
Ankit Chaturvedi, Vice-President and Global Head of Marketing at RateGain, emphasises the tourism industry’s resurgence after a three-year lull, marked by growing inbound travel to India. Notably, this market has become a leading source for the United States, the world’s largest outbound travel market. Chaturvedi highlights the industry’s strategic shift toward investment and expansion in tier-2 and tier-3 cities, aligning with the government’s vision to develop 50 tourism hubs.
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