- The organized hotel industry in India market size grew at ~4% CAGR between 2015-2019.The demand from domestic travellers remains a bright spot and thus the mid-scale hotel segment ($45-$65 ADR) holds higher growth potential
- COVID will directly impact business travellers, both domestic and International and revival will only begin by Q2-2021
- Post COVID, due to growing promotion of Hindu mythology related destinations by central and various state governments, the industry can expect a boost in spiritual tourism in under penetrated markets of North and East India
- The branded hotel room inventory in India has grown at 7.4% CAGR in 2014-2019. Total inventory in Sep 2020 was ~135,000-140,000 units
- Majority of the new hotels are now being built in tier-2 cities, outskirts of tier-1 cities and less explored leisure destinations. Going by Pre- COVID announcements in June 2019-March 2020, Radisson India has one of the biggest pipelines in the Industry of ~1,900 rooms
- IHCL remains the market leader by a significant margin accounting for more than 38% market share in 2019 but its revenues have grown at just 1.4% CAGR in past 5 years
- Lemon tree and Chalet Hotels have grown their revenue at ~18% and 17% CAGR respectively in past 5 years
HOTEL INDUSTRY IN INDIA-INTRODUCTION
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.
COVID-19 IMPACT UPDATE ON HOTEL INDUSTRY IN INDIA
The occupancy rates in India have been steadily recovering after a historic low in March-May 2020 due to national lockdown
- Between 20th March till 20th May the occupancy rates pan-India across all hotel segments were unprecedented i.e. under 5% and mostly occupied by health professionals for COVID treatment/quarantine facility
- It was only after 20th May 2020 that things started turning around. But that did not happen before the hotel industry in India lost out on two most important months of the year i.e. April and May
- Looking at the available total inventory, 50% of all hotel rooms were shutdown till end of April 2020. In the early part of May many organized hotel rooms saw a single–digit occupancy percentage
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.
|1||January 2022||Marriott||Marriott International enter joint venture pact with Prestige Group and DB Realty for new two hotels|
|2||November 2021||ITC Hotels||ITC Hotels enter management contract with Ekaaya in Udaipur under its Mementos brand|
|4||October 2021||Indian Hotels||Indian Hotels to acquire the remaining stake in Roots Corp which runs the Ginger brand of economy hotels|
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.
|1||December 2021||Tata Power and ama Stays and Trails||Tata Power and ama Stays & Trails have tied up to set up EV charging stations across 11 destinations.|
|2||November 2021||Marriott International and Prestige Group||Marriott International and real-estate develop Prestige Group and DB Realty have partnered to launch the New Delhi Marriott Marquis and The St. Regis Aerocity, New Delhi.|
|3||August 2021||ITC Hotels and CII||Industry body CII partnered with ITC Hotels to launch vocational education training by Switzerland-based hotel school EHL in the hospitality sector.|
|4||July 2020||Radisson Hotel Group and EazyDiner||Radisson Hotel Group partnered with EazyDiner to serve all 94 operating hotels of the Group’s portfolio in India.|
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.
NEW HOTEL LAUNCHES POST COVID
|1||ITC Hotels||ITC Hotels’ launched WelcomHotel, Bhubaneswar, the first Leed Platinum Certified Hotel in the state||107||November 2021|
|2||ITC Hotels||Fortune Hotels, a member of ITC’s hotel group, opened Fortune Resort Benaulim Goa, group’s first resort in South Goa||96||November 2021|
|3||Wyndham||Wyndham Hotels & Resorts launched Wyndham Chandigarh, Mohali marking its second opening under the flagship brand – Wyndham in the country.||80||November 2021|
|4||Marriott International||Courtyard by Marriott, part of Marriott International, announced its new hotel at Mahabaleshwar, Maharashtra. It is the company’s 21st hotel opening in India.||93||October 2021|
|5||IHCL||Indian Hotels Company added its 7th hotel in Madhya Pradesh, Taj Lakefront in Bhopal.||152||October 2021|
|6||IHCL||Ginger expands its presence in North-East India; signs a new hotel in Guwahati.||76||September 2020|
|7||Dusit International||Thailand’s Dusit International, one of Asia’s fastest-growing hospitality chains, expanded into India with Jain Group.||126||September 2020|
|8||Lemon Tree Hotels||Lemon Tree Hotels debuts in the holy city of Dwarka with Lemon Tree Premier, Dwarka||109||September 2020|
|9||Cygnett Hotels||Cygnett Group of Hotels and Resorts strengthens their presence in North; launches their 1st hotel in Punjab||40||September 2020|
|10||Sayaji Hotels||Sayaji Group of Hotels has added another hotel in Pune with the launch of ‘Enrise by Sayaji’.||29||August 2020|
DEPENDENCE ON FOREIGN TOURIST ARRIVALS AND OUTBOUND TOURISTS
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.
THE METEORIC RISE OF OYO
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 travellers. For domestic travellers, 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.
MARKET SIZE OF HOTEL INDUSTRY IN INDIA
- 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
THE RISE OF STAYCATION, BIZCATION AND WORKATION-POST 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 travellers, 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.
- In Sep 2020, the Fern Hotels & Resorts, launched Fern Staycations – Vocal for Localshort getaways close to home, at 20 of their business hotels across the country.
- ITC Hotels has launched the Welcombreak all-in getaway package where customers can book now and pay later with bookings valid for stays till October 31. While Indian Hotels Company has launched its 4D travel experience package, Dream, Drive, Discover, Delight which includes all meals besides spa experiences and guest transfers through ‘sanitised cars’ at ‘special rates’
- As people in India begin to plan their travel again, Hilton announced the launch of its Staycation offer – Great Small Breaks. Great Small Breaks offers Guests Hilton’s signature services along with several benefits ranging from food and Beverage credits, room upgrades and free cancellation till 24 hours prior, amongst others
PROLIFERATION OF AI IN THE HOTEL INDUSTRY IN INDIA
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 Mariott 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 utilising 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. Travellers 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 Aiosell is a B2B firm that uses machine learning (ML) and artificial intelligence (AI) to optimise 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).
RECENT PARTNERSHIP IN HOTEL INDUSTRY IN INDIA
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 organisations’ global reach will be expanded. Members of “Fans of MO” and Oberoi One, the brands’ respective recognition programmes, 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.
Galgotias 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 InterGlobe 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.
NEW PRODUCT LAUNCH
When it comes to controlling average room rates, Taj Hotels, Radisson, and Apeejay Surendra Park Hotels have all experimented with fresh models outside of their comfort zones. While Radisson opened its upscale mithai shop, Meetha By Radisson, which ships treats via well-known food delivery platforms like Swiggy and Zomato, Taj Hotels constructed its own food delivery platform, Qmin, and established Qmin food trucks.
With a crore in annual revenue, Qmin 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, Apeejay Surendra Park Hotels expanded the reach of its venerable bar brand Someplace Somewhere outside of Kolkata to Mumbai and Vishakapatnam.
Flurys, 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, Kodaikanal, Goa, Coonoor, 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 Vagator, close to Chapora 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 Welcomhotel 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 Welcomhotel 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 utilising Unique Hotels and Restaurants’ management services.
|S No||Company Name||Development|
|1||Taj Group||The Yellow House, Anjuna, an IHCL SeleQtions hotel in the Indian state of Goa, has opened, according to Taj Group-owned Indian Hotels Company Limited (IHCL).|
|2||ITC Hotel Group||Welcomhotel, an upper upmarket brand of Indian hospitality company ITC Hotel Group, intends to expand with three new facilities in Madhya Pradesh, Himachal Pradesh, and Uttarakhand.|
|3||Onora Hospitality||Onora Hospitality Pvt Ltd, has secured a contract for the first wellness resort under its new name, Bookmark Resorts. Under the juSTa and Nuo brands, the company manages 20 boutique hotels and resorts with a total of around 500 rooms across eight states.|
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, Welcomhotel, 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 jüSTa brand in places like Goa, Udaipur, Rajasthan, Rishikesh, Mashobra, and Manali in Himachal, as well as Rishikesh and Mukteshwar in Uttarakhand.
|1||November 2021||EaseMyTrip||EaseMyTrip, an online travel platform, announced the acquisition of hospitality management provider Spree Hospitality for an undisclosed sum on Thursday. In the next five years, EaseMyTrip wants to expand Spree to 200 properties, according to a statement from the online travel site.|
|2||July 2021||NOESIS||NOESIS transacts the hotel merger and acquisition of the year with the SUBA group of hotels acquiring a significant majority stake in 1589 Hotels.The transaction sees SUBA hotels adding 35 hotels and resorts across India and Nepal to its existing portfolio of 15 Hotels spread across India and UAE with significant growth to come in South Asia & the Middle East. |
|4||January 2022||Reliance Industries||Reliance Industries to acquire 73.37% stake in Mandarin Oriental New York for $98 million|
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.
The major players in hotel industry in India are
- Chalet Hotels
- ITC Ltd
- Radisson Hotels (South Asia) Pvt Limited
- Intercontinental hotels group (india) private Limited
- Lemon tree Hotels Limited
- EIH Associated Hotels Ltd.
- Bharat Hotels Limited
THIS REPORT WILL ANSWER FOLLOWING QUESTIONS
- Opportunity for new vendors in the organized hotel industry in India
- Market revenue at present and 2030 forecast. Average operating margin by segment
- Which market segment offers maximum revenue and profitability opportunity
- Occupancy rate and average room rent of hotels, by market segment
- Market share of major vendors and their growth strategies
- New entrants in hotel industry in India in 2023-30 and target cities