Article
Hospitality: A Sector on Ascendancy
August 14, 2024
India's vibrant culture, centuries-old traditions and breathtaking landscapes, coupled with a flourishing business environment, paints a picture of a nation on an incredible journey to global leadership. Our hospitality sector is mirroring this ascent, with foreign tourist arrivals reaching a staggering 19.6 lakh (1.96 million) in the first two months of 2024 alone. The hospitality boom isn't just limited to major cities like Delhi, Mumbai and Chennai. Tier-2 and tier-3 cities are experiencing a parallel surge fuelled by economic expansion, increased business activity and a growing middle class with disposable income. To boost the sector’s potential, the Union Budget 2024-25 recently unveiled the comprehensive development of tourism for temples and beaches in Bihar and Odisha, respectively.
Bolstered by the projected growth of India's Travel & Tourism Industry to a staggering USD 512 billion by 2028, the hospitality sector is poised for a major upswing. This growth presents significant opportunities for investment. International hotel chains are entering the market to target domestic travellers, while existing brands will expand aggressively through franchises, reaching a wider audience across all tiers of Indian cities. This expansion is catering to the growing middle class's demand for unique experiences, including spiritual tourism, adventure and cultural exploration, in both major metros and tier-II and -III cities.
India's hospitality sector is expected to maintain its momentum in the coming months, thanks to the country's thriving spiritual and leisure tourism, alongside the government's focus on infrastructure development. Spiritual tourism will play a crucial role in the industry's future growth, with around 60% of domestic tourism in India being spiritual in nature. To cater to the specific needs of spiritual tourists, branded hotels are being developed near religious sites, which signifies an increase in hospitality options. These hotels provide modern amenities along with tranquillity, ensuring a comfortable and enriching stay for visitors.
Steady Growth, Outpaced Demand: India's hotel room supply has witnessed a steady increase, with a projected CAGR (Compound Annual Growth Rate) of 2.5% through 2026. However, this growth is anticipated to be outpaced by the rising demand for hotel rooms, leading to a positive outlook for the industry's performance metrics. The new hotel room supply is expected to be distributed across the country. This includes tier-II destinations like Jaipur, Amritsar, Lucknow, Agra and Udaipur. This shift reflects a strategic response from hotel chains to cater to the growing demand for spiritual and experiential tourism experiences.
Upscale Boom with Mid-Range Staying Strong: As leading global brands enter and expand their operations, the focus for new room supply between 2024-2026 is expected to be on upscale, upper-upscale and luxury segments, accounting for nearly 55% of the total pipeline. Additionally, the supply of mid-segment rooms is likely to remain robust as hotels plan to offer affordable luxury options in offbeat destinations. Top hotel chains like IHCL, Radisson Hotel Group, ITC, Accor, Hyatt, etc., are rapidly expanding their numbers in India. These hotel groups are planning to cover tier-2 and tier-3 cities like Goa, Bodh Gaya, Manali, Pune, Lucknow, Kasauli Karjat, Ayodhya, etc.
Enablers of Indian Hospitality
Digital Conversion: The pandemic forced a digital revolution in hospitality and this tech-driven future promises a completely transformed guest experience. With the advent of AI, Virtual and augmented reality and the metaverse represent a future that brings a new era altogether. AI personalisation will be at the forefront, with chatbots evolving from answering basic questions to becoming intelligent assistants. These AI helpers will learn guest preferences, recommend personalised experiences and handle even complex requests. Virtual and augmented reality tours, on the other hand, will allow potential guests to virtually explore hotels and surrounding destinations before booking. They can experience the grandeur of a place virtually or feel the serenity in their comfort. The future might get even more immersive. The Metaverse's potential integration could blur the lines between physical and virtual worlds.
Government as a Growth Catalyst: The Indian government is actively supporting hospitality growth through innovative initiatives like ropeway and heliport development in Uttarakhand that will help improve connectivity to remote regions. Similarly, submarine tourism initiatives like the one planned in Gujarat will offer unforgettable underwater experiences. Major infrastructure projects, such as the Zojila tunnel, are poised to unlock year-round tourism opportunities in Kashmir and Ladakh, boosting the regional economy. This focus on making unique experiences approachable will attract travellers seeking adventure beyond the usual tourist destinations.
India's hospitality sector is poised for a sharp ascent, transforming itself into a global leader. Fuelled by a thriving economy, a captivating cultural landscape and a growing middle class eager to explore, the industry is experiencing a boom across all tiers of cities. This surge in demand, coupled with strategic infrastructure development by the government, presents opportunities for both established hospitality giants and new investors.
Bolstered by the projected growth of India's Travel & Tourism Industry to a staggering USD 512 billion by 2028, the hospitality sector is poised for a major upswing. This growth presents significant opportunities for investment. International hotel chains are entering the market to target domestic travellers, while existing brands will expand aggressively through franchises, reaching a wider audience across all tiers of Indian cities. This expansion is catering to the growing middle class's demand for unique experiences, including spiritual tourism, adventure and cultural exploration, in both major metros and tier-II and -III cities.
India's hospitality sector is expected to maintain its momentum in the coming months, thanks to the country's thriving spiritual and leisure tourism, alongside the government's focus on infrastructure development. Spiritual tourism will play a crucial role in the industry's future growth, with around 60% of domestic tourism in India being spiritual in nature. To cater to the specific needs of spiritual tourists, branded hotels are being developed near religious sites, which signifies an increase in hospitality options. These hotels provide modern amenities along with tranquillity, ensuring a comfortable and enriching stay for visitors.
Steady Growth, Outpaced Demand: India's hotel room supply has witnessed a steady increase, with a projected CAGR (Compound Annual Growth Rate) of 2.5% through 2026. However, this growth is anticipated to be outpaced by the rising demand for hotel rooms, leading to a positive outlook for the industry's performance metrics. The new hotel room supply is expected to be distributed across the country. This includes tier-II destinations like Jaipur, Amritsar, Lucknow, Agra and Udaipur. This shift reflects a strategic response from hotel chains to cater to the growing demand for spiritual and experiential tourism experiences.
Upscale Boom with Mid-Range Staying Strong: As leading global brands enter and expand their operations, the focus for new room supply between 2024-2026 is expected to be on upscale, upper-upscale and luxury segments, accounting for nearly 55% of the total pipeline. Additionally, the supply of mid-segment rooms is likely to remain robust as hotels plan to offer affordable luxury options in offbeat destinations. Top hotel chains like IHCL, Radisson Hotel Group, ITC, Accor, Hyatt, etc., are rapidly expanding their numbers in India. These hotel groups are planning to cover tier-2 and tier-3 cities like Goa, Bodh Gaya, Manali, Pune, Lucknow, Kasauli Karjat, Ayodhya, etc.
Enablers of Indian Hospitality
Digital Conversion: The pandemic forced a digital revolution in hospitality and this tech-driven future promises a completely transformed guest experience. With the advent of AI, Virtual and augmented reality and the metaverse represent a future that brings a new era altogether. AI personalisation will be at the forefront, with chatbots evolving from answering basic questions to becoming intelligent assistants. These AI helpers will learn guest preferences, recommend personalised experiences and handle even complex requests. Virtual and augmented reality tours, on the other hand, will allow potential guests to virtually explore hotels and surrounding destinations before booking. They can experience the grandeur of a place virtually or feel the serenity in their comfort. The future might get even more immersive. The Metaverse's potential integration could blur the lines between physical and virtual worlds.
Government as a Growth Catalyst: The Indian government is actively supporting hospitality growth through innovative initiatives like ropeway and heliport development in Uttarakhand that will help improve connectivity to remote regions. Similarly, submarine tourism initiatives like the one planned in Gujarat will offer unforgettable underwater experiences. Major infrastructure projects, such as the Zojila tunnel, are poised to unlock year-round tourism opportunities in Kashmir and Ladakh, boosting the regional economy. This focus on making unique experiences approachable will attract travellers seeking adventure beyond the usual tourist destinations.
India's hospitality sector is poised for a sharp ascent, transforming itself into a global leader. Fuelled by a thriving economy, a captivating cultural landscape and a growing middle class eager to explore, the industry is experiencing a boom across all tiers of cities. This surge in demand, coupled with strategic infrastructure development by the government, presents opportunities for both established hospitality giants and new investors.