UHNIs, corporate businesses set to lead hotels sector

An increasing number of regional businesses and individuals with deep pockets are actively pursuing hotel development, and displaying steadfast, long-term commitment to this sector, according to the JLL research, exclusively carried out for Mint

Traditionally, India’s hospitality sector has primarily been dominated by proprietors, who operated their own establishments. However, the entry of international brands gave way to asset-light models, facilitating faster growth of the sector. This shift encouraged real estate firms and landlords to enter the hospitality space.

Now, new-age investors are attracted to the sector’s long-term growth potential, supported by India’s current economic growth and rising disposable incomes.

Furthermore, India’s future growth in hotel supply is set to extend well beyond the urban centres, the report said, adding that a significant number of new hotel signings will originate from tier-II and III markets, primarily via conversions and rebranding, particularly in the mid-scale segment. This trend will be driven by cities emerging as focal points for infrastructural development as well as better connectivity, making them attractive destinations for business travellers.

According to Jaideep Dang, managing director, hotels and hospitality group, JLL India, major urban centres will remain the focus of premium, large-scale hotels with 400-plus rooms, with a concentration around business districts.

India’s future demand for room nights is also projected to outpace supply in the medium term, while tier-I hospitality markets reach maturity and tier-II and III cities continue to grow, he said.

Over the past 18 months, the premium segment accounted for 60% of branded hotel signing in tier-1 cities, while the remaining 40% was in the mid-scale category. In contrast, tier-II and III cities saw around 70% of their inventory in the mid-scale segment. However, tier-1 cities continued having a higher share of hotels with 250 rooms each.

The report also said key hospitality markets are expected to witness continued growth in the average daily rate and revenue per available room, two crucial metrics for calculating room revenues.

Data also suggests that India’s most profitable hotels with a bottom line exceeding ₹100 crore are typically concentrated in big tier-I cities and usually have upwards of 250 rooms, are present in prime locations in business districts, and have a proximity to key demand generators like commercial offices, airports and large conferencing facilities.

Updated: 05 Sep 2023, 12:57 AM IST