Impact of tourism on the Indian hotel industry remains immense

The direct contribution of the hotel industry to the GDP, which was $40 bn in 2022, is expected to reach $68 bn by 2027 and touch around $ one trillion by 2047.

The hospitality industry in India’s market size is estimated at $ 24.61 billion in 2024, and is expected to be $31.01 billion by 2029, growing at a CAGR of 4.73% during the forecast period (2024-2029). The industry has been scoring a moderate growth number in the past few years and has great potential to score an even greater number in the future.

The demand from Meetings, Incentives, Conferences, and Exhibitions (MICE) is also contributing to its growth. As businesses start to return to normal operations, the need for conferences and corporate events has surged. Hotels are benefiting from the hosting of these events, which has become a significant source of revenue.

Foreign Tourist Arrivals (FTAs) are expected to increase in the latter half of fiscal year 2024, contributing to the industry’s growth. The ease of international travel restrictions and a desire to explore India’s diverse culture and landscapes are anticipated to attract more foreign tourists.

ICRA estimates that premium hotel occupancy in India will reach around 70-72 percent in FY2024, a notable improvement from the previous year. This increase in occupancy is complemented by a rise in Average Room Rates (ARRs), which are expected to be in the range of Rs. 6,000-6,200 in FY2024.

The demand will vary by location, competition, and other property-related dynamics. Gateway cities like Mumbai and Delhi are likely to witness occupancy rates of over 75 per cent, thanks to transient passengers, business travellers, and MICE events, while Pune and Bengaluru may lag behind but are still expected to see a significant improvement in FY2024.

While demand is surging, supply growth in the hotel industry is expected to increase at a CAGR of 3.5-4 per cent over the medium term. However, supply may not match the demand due to land availability issues, especially in premium micro-markets in metros and larger cities. This supply constraint is encouraging the rebranding and upgrading of existing properties and development of new hotels in suburban areas.

The Indian hotel industry is on a trajectory of robust recovery and growth in FY 2024, with positive demand trends, resilient domestic travel, international events, and cost-saving measures contributing to this resurgence. Its ability to adapt and innovate in the face of challenges has allowed it to capitalize on emerging opportunities and position itself for a bright future.

Amid it all, could Gen Z change the shape of tourism by asserting an environmentally consciousness about travel decisions?

Hosting major events is expensive but hugely profitable, with an extra three million people expected in Paris for the Olympics, increasing tourism spending by up to €4 billion according to market research provider Euromonitor International, which expects a steady increase in inbound visitors to France and its capital city from 2025.

The war in Ukraine and the ongoing operations in Gaza have had little impact on global travel, but have hit the regions and those around them heavily. That is likely to be the ongoing story of 2024.

While the number of tourists visiting Israel rose in 2023 compared with 2022, visitor numbers plunged in October after the Hamas attacks and remained low for the rest of the year, the Israeli Tourism Ministry has said.

While conflicts seem not to have dissuaded travellers generally, those countries heavily impacted already are unlikely to see any change.

There is nothing new in the rise of sustainability but analyst Mintel believes that in 2024 travel brands can tap into the sustainable accommodation sector by promoting a range of differing cost options.

A number of operators are promoting more sustainable choices for consumers, by unveiling ‘sustainable holiday’ tabs in which travellers can browse through a range of different hotel options, all accredited by the Global Sustainable Tourism Council (GSTC).

Mintel says that it is imperative for travel brands to step up and take accountability into consideration for their environmental impact, particularly as issues surrounding sustainability permeate every aspect of daily lives.

In 2024, in exchange for contributing to conservation efforts, sustainable itineraries will give travellers exclusive access to the places that they are helping preserve, booking.com speculates, while sustainable travel apps will offer rewards such as experiences with locals in off-the-beaten-path areas or visiting remote locations that tourists otherwise have limited access to.