The 2024 outlook for Indian hospitality is one of promise and consolidation
HAI’s Vision 2047 report indicates that contribution of hospitality sector could reach $ one trillion by 2047
Sustenance of domestic leisure travel, demand from meetings, incentives, conferences, and exhibitions (MICE) including weddings, and business travel (despite a temporary lull during election period) are likely to drive demand in FY2025
The global Hospitality market size, which was valued at $4409780 million in 2022, is expected to expand at a CAGR of 10.43% during the forecast period, reaching $ 7997647.2 million by 2028.
Hospitality can be defined somewhat broadly as an industry that focuses on providing consumers with a means to participate in leisure activities, be that staying in a hotel or dining in a restaurant. It encompasses many industries, the largest of which are accommodation and food and drink services. In 2023, the global hospitality market reached over $4.7 trillion and was forecast to grow to around $5.5 trillion this year.
In January 2024, the hotel sector in India saw lower occupancy compared to pre-pandemic levels but continued growth in average rates.
Mumbai was the only market that breached the 80% occupancy level mark, while Kolkata and Ahmedabad crossed the 75% mark. Hyderabad and Kochi saw a year-on-year increase of over 30% in average rates.
With India continuing to celebrate the great dance of democracy, aka general elections, the nation looks at both the short term and long term visions. The Hotel Association of India (HAI) considers that it is an opportune time to outline the national priorities by all participants of India’s polity and therefore a time to restate the key importance of tourism and hospitality in any future development vision for the country.
K.B. Kachru, the newly elected HAI President puts things in the right perspective while maintaining “The time has come for India to achieve its true development potential in order to become the third largest country by GDP. It is now recognized globally that tourism and hospitality can play a pivotal role in driving such growth. The Vision 2047 report by HAI indicates that contribution of hospitality sector could reach $ one trillion by 2047”.
India’s population dividend can go awry if employment opportunities are not created. Tourism and hospitality as the largest employer fill that role. It has been indicated, he said, that properly nurtured, this sector could generate 50million jobs. “We would be happy if all the stakeholders recognize the great employment and growth potential of tourism and hospitality and make it a part of their commitment”, he says amid hopes and expectations.
ICRA expects the Indian hotel industry to report a 7-9% revenue growth in FY2025, over the 14-16% growth expected in FY2024. Sustenance of domestic leisure travel, demand from meetings, incentives, conferences, and exhibitions (MICE) including weddings, and business travel (despite a temporary lull during election period) are likely to drive demand in FY2025. Spiritual tourism and tier-II cities are expected to contribute meaningfully in FY2025.
ICRA estimates the pan-India premium hotel occupancy at decadal highs of 70-72% in FY2024 and FY2025, after recovering to 68-70% in FY2023. Pan-India premium hotel average room rates (ARRs) are expected to at Rs. 7,200-7,400 in FY2024 and rise further to Rs. 7,800-8,000 in FY2025.
JLL India, a consultancy firm, has released its latest report titled 'Hotel Investment Trends: India 2023’. The report highlights the growth and positive start of the first quarter (Jan-March) of 2024 in the hospitality sector. It mentions that the year’s first quarter witnessed a significant 80 per year-on-year increase in hotel transaction volumes, reaching $78 million.
The sector has been witnessing a good surge since last calendar year (2023). A record number of hotel signings and openings took place in 2023, with 25,176 keys signed and 12,647 keys opened. Further, there is an increasing interest in hotel development activity in Tier-2 cities, with 54 per cent of the total signings taking place in these locations.
In 2023, hotel investments touched $401 million, which was nearly four-fold the volume witnessed in 2022. Around 25 per cent of the overall value of transactions involved under-construction hotels in both business and leisure destinations. Last year helped achieve a significant milestone of 22 hotel transactions, which is the largest number of assets traded in the last decade.
It also saw the debut of three hotel companies on the stock market through their initial public offerings (IPOs). There were approximately 13,600 greenfield projects in 2023, surpassing the figure from the previous year (8,000 keys), showcasing the enduring confidence of hotel developers in the long-term growth potential of the sector, according to a company statement.
Furthermore, the report notes the emergence of tourism and leisure destinations as centers for Meetings, Incentives, Conferences, and Exhibitions (MICE) activities, with the signing of three large-format hotels with about 900 keys.