Hotel industry's growth set to extend $1 trillion boost to GDP by 2047

The hospitality industry in India is estimated at $ 23.50 billion in 2023 and is expected to touch $ 29.61 billion by 2028, growing at a CAGR of 4.73% during the forecast period (2023-2028).

The industry has been scoring a moderate growth number in the past few years and has immense potential to score a greater number in the future. The nation, which is rich in culture and diversity, has been attracting a large number of tourists from all over the globe. India has been globally recognized as a preferred destination for spiritual tourism.

The country’s hospitality sector is being driven by the increase in the number of hotel projects. The industry ended in the current year with occupancy in the 59-61 percent range, up 15-17 percentage points (pp) from the previous year. However, the average rates (ARR) recovered fully in the current year, being 37-39 percent higher than the previous year's levels. As a result, RevPAR in the current year increased by 89-91 percent over the previous year.

Driven by a strong recovery in demand, hotel companies accelerated their growth plans in the current year, resulting in an over 33 per cent increase in brand signings by keys over the previous year. 166 new hotels with 14,885 rooms were signed during the year, while 90 hotels with 5,702 rooms were rebranded.

Hoteliers continued to expand their portfolios in leisure destinations as well as Tier-3 and 4 cities, recognizing the enormous untapped potential in these areas.

Furthermore, over 200 G20 meetings are expected to be held across 55 destinations in the country till November 2023. The domestic hotel sector stands to gain significantly from this development, as there will be an incremental demand in cities where the meetings will be held.

In April, three international hotel chains announced the debut of their luxury brands in India. Hilton’s Waldorf Astoria and Minor Hotels’ Anantara brands are set to touch base in Jaipur, while Radisson has picked Hyderabad for the launch of its Radisson Collection brand. Fairmont Hotels & Resorts announced that it would be opening a property in Agra in 2025.

The direct contribution of the Indian hotel industry to the country's GDP is estimated to touch $1 trillion by 2047, driven by a significant jump in domestic tourist visits and international arrivals. As per the 'Vision 2047: Indian Hotel Industry' by the Hotel Association of India (HAI) and Benori Knowledge, the direct contribution of the hotel industry to GDP was $40 billion in 2022 and is expected to reach $68 billion by 2027. By 2047, it will reach around $1 trillion, it added.

The hospitality industry body pointed out that for the sector to achieve its target, the accommodation growth will have to go beyond the metros to two and three-tier cities apart from rural areas. It also clarified that the total contribution includes aspects of services from corresponding industry verticals such as food and beverage, salon & spas but excludes consideration of services market growth and thus taking out scenario-based contribution estimates.

"The number of domestic and international tourists visiting various states for business and recreational reasons is increasing at a rapid pace. All these factors have created new opportunities in tourism and the hospitality industry," the body said.

While macroeconomic factors, technology, environment and social sustainability, and policy support will be important factors, HAI Secretary General M.P. Bezbaruah said that "overarching all the factors will be the sustainability of the sector and of all the operations. Our vision is that the accommodation growth will have to go to two-tier, three-tier cities and also to the rural areas because real tourism is going to be one major plank of the future tourism because tourists are looking for new experiences."

He reiterated the need for giving industry and infrastructure status to the sector, saying it would help in the development of more rooms in order to bridge the demand and supply gap.

They pointed out that after the pandemic, the hospitality industry witnessed a shift in consumer preference and the service providers have found new ways to move forward, with hotel companies acknowledging the significant potential of domestic tourism.

"Major players are diversifying into the mid-market segment to develop budget hotels and cater to increase the inbound travel," the HAI said, adding that the industry is on its way for a digital transformation, where operations are becoming leaner.