The Indian hospitality sector, one of the worst affected by the pandemic, has shown a strong resurgence and is attracting robust capital inflows as room revenues doubled on year in the March quarter. Over $2 billion is expected to be invested by foreign and domestic institutions over the next two-four years.
Revenue per available room rose over 100 per cent in the March quarter of 2023 driven by corporate travel, weddings, conferences, and exhibitions, data from JLL India showed. The growth is on a low base as January of 2022 was hit by the Omicron variant of the coronavirus. According to channel checks made by ICICI Securities, average room rates across the industry were 15-20 per cent higher in FY23 from pre-Covid levels while in the current quarter, they are 8-10 per cent higher.
Leisure travel
Leisure travel is also making a strong comeback as with all restrictions lifted people can finally plan vacations. With the World Health Organisation officially declaring an end to Covid-19 as a public health emergency, international travel is also expected to pick up, and hotel industry circles said that they expect room rates to soar.
Industry leader Indian Hotels’ room rates in the March quarter were 36 per cent higher than pre-pandemic levels while revenue per available room was higher by 60 per cent. Chalet Hotels saw its room rates double. Occupancy for Indian Hotels was 68 per cent, while Chalet Hotels reported occupancy of 74 per cent.
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“The momentum of the first quarter of the year is expected to continue with the second quarter remaining busy on the back of business travel, MICE, and weddings,” said JLL India.
HVS Anarock expects the expect the revenue per room to rise to ₹4,690 in 2023 and ₹5,194 in 2024 compared to the industry average of ₹3,600 in 2022. The men’s world cup cricket in November this year is expected to be a strong travel driver.
Supply of rooms will be lagging demand for the next few years keeping the rates buoyant. CBRE has estimated that 12,000 hotel rooms will be added in 2023 and will grow at 3.3 per cent annually till 2025.
Institutional inflows up
Institutional inflows into the sector have been pegged at $2.3 billion over the next two-four years, compared to the $400 million that flowed into the sector in the pandemic years. “Increasing investor interest has been one of the significant drivers of growth for the Indian hospitality space in the past couple of years,” CBRE said.
International hospitality chains are expanding their presence in India. For instance, Japan’s HMI Company recently committed to investing ₹7,200 crore in Uttar Pradesh to develop 30 new hotels. Marriott is planning a 250-hotels portfolio in India by 2025, it is also looking to bring in its luxury range in the country.
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Hilton Waldorf Astoria and Minor Hotels Anantara will be shortly setting up operations in India while Radisson will be launching its upmarket Collection brand in Hyderabad shortly.
JLL said that in the March quarter transactions worth ₹230 crore were seen. “We expect this sentiment to continue as credible investors are evaluating marquee hotel assets and portfolios.”