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2024 Update Coming Soon Published Date: Sep 2020 Number of Pages: 100
The hotel industry in India, partially organized and majorly unorganized caters to ~1.8 Billion domestic travelers and 9-9.5 Million foreign travelers. About 55% of organized hotels in India belong to 3-star or higher categories.
Tamil Nadu and Uttar Pradesh account for more than 35% of all domestic tourist visits in India.
Air traffic reform in India, initiated in 2005 with the rise of low cost carriers had a major role in driving the hotel industry growth in India. As a result the tourism industry in India has been growing and has vast potential for generating employment and earning foreign exchange.
Atithi Devo Bhava, which translates to “the guest is God,” is the foundational idea behind hospitality in India. India is a country filled with countless images of people, faces, religions, cultures, adventures, and memories.
With rising consumer demands and a desire to provide visitors with fresh experiences, hotels are beginning to offer unusual lodgings. Homestays, historic inns, boutique hotels, houseboats, treehouses, and luxury trains are a few examples of inventive hospitality offerings.
The occupancy rates in India have been steadily recovering after a historic low in March-May 2020 due to national lockdown
The impact will be rather higher on the unorganized hotels in India which outnumber the branded hotels by a very big margin. We believe at least 5-8% unorganized hotels could be shutdown permanently.
The hospitality sector got Industry status in 2012 now needs a significant package from the government which is yet to announce the same.
Among five most important hotel ownership models globally, Franchise and lease and license models are now getting increasingly popular in India as compared to owned hotels category. Over the past five years the 2-3-star hotel occupancy has grown at the highest (~7%) rate YOY. A large chunk of that can be attributed to the growth in organized hotel industry in India.
In the organized hotel industry in India, the Indian consumer internet market is largely concentrated in urban and affluent cities. As a result of that, most of the online bookings for hotels are done by residents of tier-1 and tier-2 cities.
The operating margin for budget and mid-category hotels is between 18-25% in India, which can be even lower considering heavy discounting by online hotel aggregators and thus the market will always need high inventory and >60% occupancy rates.
In the organized sector, more than 60% of bookings are done online, just 2 days in advance. The GST council`s rate cut on from 28% to 18% for upscale hotels, and from 18% to 12% for mid-scale is expected to be a major growth driver for hotel industry in India in coming years.
The MICE (Meetings, Incentive, Conventions and Exhibitions) industry plays a significant role in the global hospitality sector and has the potential to further India’s development as a travel destination.
Due to MICE, which enables the sale of several hundreds or even thousands of hotel nights as compared to transient travellers who only use a few room nights at a time, overall international visitations are projected to increase many times over. The majority of delegates also frequently travel before and after the event, which contributes to the expansion of the hospitality sector as a whole.
Foreign tourist arrival led to FOREX earnings of ~$30 Billion in 2019.Bangladesh, US and UK accounted for ~21%, 14% and 10% of all arrivals respectively in 2019
Expanding compulsory quarantine for a minimum of 14 days by passengers coming from International countries coupled with travel bans issued for many countries as a measure to prevent the spread of Covid-19 resulted negatively for the tourism industry of India this year.
India has a robust domestic market which could soften the impact as compared with nations that rely largely on international tourists. India receives 11 million foreign tourists, which is small compared to its size and relative potential.
At least 24 million Indian tourists travel abroad each year and spend an estimated $25 Billion.
Most of the below 3-star hotel industry in India is catered by economical range of hotels i.e. which offer rooms at $20(1,400 INR) / night or less. The premium segment i.e. >$100(7,000 INR) per night makes up for less than 5% of total market. This is the reason OYO has been able to scale up its operations so rapidly in just 6 years of its existence. But the story just doesn`t end there.
Oyo majorly caters to urban domestic travelers. For domestic travelers, traditional and emerging themes of tourism including nature, heritage and cultural, religious, adventure, medical and wellness, MICE and wedding have been a key attraction.
Systematic growth, maintenance and sustainable development of tourism destinations and focus on promoting emerging avenues of tourism will be essential towards unlocking its true potential.
In October 2019, OYO announced that it was planning to raise $1.5 Billion in its upcoming funding round, to expand its position in the US and Europe.
In FY 2019, OYO had a net loss of $332 Million on revenue of $900 Million. China operations accounted for ~40% of overall losses. The annual filing also stated that Oyo will post a profit in its India and China operations starting 2022. As per OYO, in the final six months of 2019, its China operation could generate a loss of ~$175 Million in EBIDTA.
The Indian organized hotel industry market size was estimated at ~11,920 Crore INR ($1.7 Billion) in 2019 and average annual revenue/room was ~$12,400 per annum Post COVID, revenues will decline by ~48% in 2020 YOY but the market will also see a sharp recovery in 2021 and 2022 led by domestic leisure tourism The share of organized sector is expected to increase from ~5% in 2019 to ~8% in 2025 on account of growing pipeline from bigger brands and inventory reduction in unbranded hotels due to COVID
Operationally, resorts that are located within five to six hours driving distance from cities will be the first ones to recover as demand will be driven by domestic leisure travelers, who might still be hesitant to take flights and rather drive for short breaks over weekends.
The tourism industry, which has suffered a sudden yet savage blow, is counting on this surge in staycations to recover. More and more luxury hotels, resorts, homestays and other players are designing staycation packages to lure potential customers.
Data and AI technology are also bringing revolutionary changes on the supplier side of the hotel industry globally. In India, personalized hotel recommendations and better promotions are now possible via hotel’s online reviews and is happening on a much bigger scale now as compared to few years ago.
AI is also finding application in improving sustainability. For example, in Sep 2019 JW Marriott took the initiative of going ‘plastic-free’ with its Artificial-Intelligence technology-based water treatment and purification plant.
The Park Inn by Radisson IP Extension also recently launched their Voice Assistant-enabled intelligent hotel rooms, virtual control over lighting fixtures & TV, and full automation service requests. The Marriott group recently initiated AI-powered facial recognition tech to perform seamless check-ins.
Incorporating AI-powered virtual assistants like Connie at the front desk and in hotel rooms, as well as utilizing data analytics to increase customer happiness and retention, Hilton is one example of a hotel chain that has adopted AI technology.
Language differences can be eliminated with advancement, allowing AI-based management to enhance hotel guest service. Travelers will have a terrific experience with this new technology that is clear and understandable!
Going touchless is great for hotels because it allows them to have less interaction with their customers. Additionally, since there won’t be any need to touch surfaces like desks or other items that could potentially spread germs, staff members can clean rooms faster and more effectively if you’re staying there.
Bengaluru-based Ai sell is a B2B firm that uses machine learning (ML) and artificial intelligence (AI) to optimize hotel revenue and offer dynamic pricing. In addition to increasing rates and improving occupancy, this also lowers overhead expenditures and operational expenses.
Over 150 hotels and homestays are partners with the startup worldwide. In order to push rates selected by the AI system, it also links with current online travel agencies (OTAs) and hotel property management systems (PMS).
Partnership between Unilever and OYO is announced for improved hotel hygiene. As part of the homes and hotels company’s “Sanitized Stays” campaign, Unilever is providing hygiene kits for guests as well as hygiene education and supplies for hospitality staff at some OYO locations in India.
OYO and Unilever’s partnership will launch in India first before expanding to OYO’s properties in other countries throughout South East Asia, Europe, the US, and South America. Strict cleaning standards, minimal-touch services, and enhanced credibility are at the top of the list of customer requirements in the hospitality industry during the Covid-19 pandemic.
The Oberoi group and the mandarin oriental hotel group have formed a long-term “strategic agreement” to work together on a variety of projects while maintaining the individual histories and identities of each brand.
Through this collaboration, both organizations’ global reach will be expanded. Members of “Fans of MO” and Oberoi One, the brands’ respective recognition programmers, will also have access to more than 50 upscale hotels in popular locations, where they will be given superior recognition and be given access to special events and deals.
Galgotia University’s School of Hospitality and Tourism forms an MOU with Sarovar Hotels and Resorts (Pvt. Ltd.) to train and coach young people who want to work in the hospitality industry to become effective general managers and business leaders.
A Decade after leaving the country, the French hospitality company Accor returned. A year later, Hilton Hotels & Resorts, a large international hospitality corporation from the United States, entered the nation. For their different forays, both corporations decided to collaborate with a regional partner.
For the purpose of creating and running the Ibis brand of budget hotels in South Asia and India, Accor established two joint ventures with Inter Globe Enterprises.
In order to acquire and operate 50 hotels under its premium Hilton and midscale Hilton Garden Inn brands, Hilton formed a 26:74 joint venture with a real estate developer, DLF. Accor currently operates 55 hotels under 10 different brands, including Raffles, Fairmont, Novotel, Pullman, Sofitel, Mercure, and Ibis in India, serving every segment of the hospitality industry.
The midscale and upscale market is served by 24 hotels under the Hilton, Hilton Garden Inn, DoubleTree by Hilton, and Conrad brands. By introducing its new midscale brand, Park Inn & Suites by Radisson, the Radisson Hotel Group has declared that it is starting a brand-new age of hospitality in India that will propel the portfolio’s fast growth in the nation. The Group hopes to open almost 150 hotels and resorts in India, doubling its current presence there.
When it comes to controlling average room rates, Taj Hotels, Radisson, and Apetaly Surendra Park Hotels have all experimented with fresh models outside of their comfort zones. While Radisson opened its upscale mithai shop, Maitha By Radisson, which ships treats via well-known food delivery platforms like Swingy and Zomato, Taj Hotels constructed its own food delivery platform, Quin, and established Quin food trucks.
With a crore in annual revenue, Quin is already a successful brand that serves food from the fine-dining restaurants of the Taj Hotels. In addition to launching the meal delivery service Flying Tonga, Ape jay Surendra Park Hotels expanded the reach of its venerable bar brand Someplace Somewhere outside of Kolkata to Mumbai and Vishakhapatnam.
Floris, a bakery and confectionery company, has also extended from its original location on Kolkata’s Park Street to other areas of the city as well as Mumbai. The Am Stays & Trails homestay portfolio of the Indian Hotels Company is growing.
The company has 24 bungalows and villas in its inventory, with eight more under construction. In places throughout Trivandrum, Kodai kanal, Goa, Conor, and Uttarakhand, The Flag will shortly introduce additional bungalows.
The launch of three foreign hotel companies’ luxury brands in India was announced. Jaipur will host the debuts of Minor Hotels’ Anantara and Hilton’s Waldorf Astoria, while Radisson has chosen Hyderabad as the location for the premiere of its Radisson Collection brand.
Additionally, Fairmont Hotels & Resorts declared that it would debut a property in Agra in 2025. In India, Fairmont is expanding, and four fascinating new properties are now being built. “Agra will complete India’s northern Golden Triangle, along with Jaipur and Udaipur, when it opens.
With the opening of the Waldorf Astoria and Anantara Jaipur Hotels in 2027, India’s wedding and events market will be targeted. The Waldorf Astoria Jaipur will be primarily focused on weddings, meetings, and events.
The opulent portfolio of Marriott International JW Marriott has opened JW Marriott Goa in the coastal state of Goa, India. The 151-room hotel is situated along Vacatur, close to Chopra Fort, a well-liked tourist destination in the region.
To ensure seamless connectivity and reduce connecting times between flights, the Indian government has put into motion a plan to turn Indian airports into aviation hubs, starting with the Delhi airport.
Upper upmarket brand Welcome hotel of Indian hospitality giant ITC Hotel Group wants to expand with three new hotels in Madhya Pradesh, Himachal Pradesh, and Uttarakhand. ITC recently signed a contract to build the 136-room Welcome hotel Gwalior, which is expected to open in 2025.
In a few months, the hotel group will also debut a 46-key hotel in Manali. A new property in Dehradun will be developed utilizing Unique Hotels and Restaurants’ management services.
The Yellow House is a 49-room heritage hotel that has an all-day dining area, a bakery, a cocktail bar and provides experiences like private yoga and meditation classes. “This opening is in keeping with IHCL’s aim of increasing its presence in Goa, which celebrates its huge tourism potential.
In a few months, the hotel chain, Welcome hotel, would also debut a 46-key hotel in Manali, it was noted. A new hotel in Dehradun will be developed under a management agreement with Unique Hotels and Restaurants. The existing property is currently being transformed into a 78-key hotel.
At the moment, wellness resorts in India either offer very basic service levels or premium levels and pricing points. They wanted to reach a wider audience with a luxury, target-oriented, holistic wellness offering given how people are focusing on wellness.
Onora Hospitality’s mission is to provide transformative retreats in beautiful settings that encourage discovery experiences because health is all about reconnecting with their inner self. Since then, the company has launched 10 opulent resorts under the joust a brand in places like Goa, Udaipur, Rajasthan, Rishikesh, Mashobra, and Manali in Himachal, as well as Rishikesh and Muktesh war in Uttarakhand.
In the branded hotel category, Marriott International with the merger of Starwood Hotels and Resorts, has outpaced Taj Hotels Palaces Resorts Safaris (including Ginger) to hold the largest hotel inventory in India.
IHCL and ITC Hotels are the most popular operators with a very wide presence. Chalet Hotels and Lemon Tre hotels are scaling up rapidly post COVID-19.
In 2019, Chalet Hotels Ltd (CHL) launched a successful IPO in early 2019. It also decided to scale up partnership with Marriott Intl by signing 5 new contracts in Dec 2019.
Choice Hotels India, a wholly-owned subsidiary of the US-based Choice Hotels International, is looking to open 11 new hotels in India, mainly in Tier-II and -III cities, in 2020. At present, it has 32 operational hotels in India.
Radisson South Asia Pvt Limited is aggressively expanding its presence and as per annual filings generated a Revenue of 75 Crore (~$11 Million) in FY 2019.
Chicago headquartered Hyatt Hotels Corporation currently has 32 hotels across 20 cities under its eight brands in India. In 2019, it had announced that it will open 11 new hotels in India by the end of 2020. It is also looking at expanding in tier II and tier III cities in coming years.
Tamara hotels will be investing INR 350 crore (~$50 Million) in Tamil Nadu and Kerala by 2022 and plans to take its room count to 1,000 by 2025 from ~300 at present.
