The recovery of Indian travel and tourism is focused on capitalizing on very significant growth and overall societal change, as the opportunity ahead offers temptations not seen in a while.
Government alignment with the travel industry is never straight forward but adding to the national positivity is the imminent release of the official updated tourism policy, focusing on the rejuvenation and extension of how domestic tourism and travel will become a larger part of the country’s gross domestic product.
Honorable Minister of Tourism Shri G. Kishan said during the recent Hotel Association of India Hoteliers’ Conclave in New Delhi that there is an expectation of a modernized but also broad policy, including a focus on tourism across wide areas including medical, religious and pure leisure — while trying to attract foreign direct investments.
Adding political clout to Indian hotels is India picking up the G20 host responsibility from Indonesia for 2023, and with 55 locations selected across the nation based on quality of hotels and airlift needed, it brings a global publicity lens along with increased demand. In a historic first, we will also have the G20 troika formed by developing nations — with Indonesia passing hosting responsibilities to India which in turn will pass to Brazil.
Inbound Tourism Remains Comparatively Low
Shri Arvind Singh, secretary at the Ministry of Tourism for India, acknowledged that overseas consulates and embassies are not ideally informed, equipped and ready to promote India to travelers. How upcoming changes will visualize remains to be seen as officials are distracted by a battle for infrastructure updates around the nation.
Many agree that India needs more new hotel supply, particularly in mid-range product and located in growing second- and third-tier cities. Legacy-driven regulations and licenses continued to be major barriers, with even post-pandemic funding of new construction adding to constraints. Amid a lack of visible new hotel supply on the horizon, it is uncertain how the industry can cope with and satisfy demand growth three to five years down the line.
Combination of Strong Growth Factors
In stark contrast to the rest of Asia, where airline seat capacity is still far behind 2019 levels, India is leading the way globally with both domestic and international airlift well underway by the third quarter of 2022.
In the recovery of hotel performance, some regions are lagging others, but patterns have emerged across hotel class, location, business segment and weekday travel.
One trend that sets India’s hotel industry apart from other global regions is that, for almost a year now, average daily rates for group business have been higher than those for transient bookings. Clearly Indian weddings in 2022 come at a high price not just in food and beverage but also in room revenues.
While it’s true that tourism in India historically is not immune to a U.S. recession, strong domestic travel demand and a potential to adjust quickly to new demand patterns should help it to endure a potentially bumpy 2023.
Dr. Jyotsna Suri, chairwoman and managing director of Bharat Hotels and venue host at LaLit New Delhi, said there is an urgent need to rethink financial policies amid high interest rates and short tenures on loans. Her company was looking for an IPO pre pandemic and certainly has this in mind as things stabilize and capital is raised to expand and invest in the portfolio.
Priya Paul, chairwoman of Apeejay Surrendra Hotels, was in a similar position, with IPO plans in place just as COVID-19 struck. Instead she had to manage a stressed profit-and-loss statement and plans to move the company to a more asset-light distribution — now less than 50% owned — in order to reinvest and grow in the future.
Hotel Brands’ Plans for India
Global hotel brands with a footprint in India continue to grow, even without direct investment. Both Radisson Hotel Group and Marriott Hotels are adding substantial numbers of hotels in India. The target for Marriott is an additional 200 hotels in India by 2025.
When those hotels are converted from independents, that certainly adds to the pool of branded hotels in one of the least-branded nations in the world. Only between 5% and 10% of all hotels in India are branded by a recognized hotel chain. While hotel inventory in the past decade has shifted to 50% branded, India still has a very large regional portfolio of unaffiliated inventory.
Challenges Ahead
At a global level, India — along with Sri Lanka — is a leader in terms of women represented in leadership positions in the hospitality industry.
Speakers at the India Hoteliers’ Conclave acknowledged that amid tight labor markets and workforce challenges, the current framework of creating strong and safe workplaces for women in the country may not be enough and further action might be needed to ensure the talent pool expands further.
The way hoteliers think about and use data also is likely to change.
Patu Keswani, chairman and managing director of Lemon Tree Hotels, encouraged hoteliers to look beyond traditional metrics and adopt more dynamic industry methods across revenue management, finance and development. As a key advocate of improved digitization, he presented the benefits of using data in a better way, benchmarking not only with hotels but also across affordability in a market and total pricing.
He also reiterated the challenge to build new hotels as the risk assessment for funding in this asset class remains volatile. Rebuilding capital takes time, as more than 20% of capital was wiped out during the pandemic, but he also envisions future consolidation and the return of IPOs to gain funding.
As India enters its peak festival season, if one airport and immigration experience is indicative of the whole, I can only say that things are looking very good for India.
It was arguably the smoothest and least complicated entry for me in the past decade, from visa renewal to immigrations and entering the capital. There wasn’t even the need to Mankad my way through.
Jesper Palmqvist is area director for the Asia-Pacific region at STR, CoStar’s hospitality analytics firm.
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