The Indian hotel industry has bounced back remarkably over the last few years after weathering the pandemic-induced downturn. Rising disposable income among middle-class households, rise in cultural heritage and spiritual tourism, and government efforts to promote tourism have contributed to the impressive recovery of the hospitality sector.
Hotel investment is surging in India, which is forecast to lead the number of new hotel openings in Asia Pacific excluding China through 2026. In its latest study on Asia Pacific hotel construction pipeline trends, Lodging Econometrics (LE) said India ended the second quarter with a record 610 projects and 75,280 rooms, accounting for 30% of the total projects in the overall Asia Pacific pipeline. India's impressive performance was followed by Vietnam (247 projects/85,760 rooms), Indonesia (181 projects/31,550 rooms), Thailand (163 projects/38,350 rooms) and Japan (162 projects/30,122 rooms).
India's allure among investors isn't likely to lose anytime soon: LE analysts predict India will account for 25% of Asia Pacific openings this year and remain the region with the most new openings through the end of 2026.
Hotel investment in India has recorded impressive growth.
According to the JLL report, India is witnessing impressive growth in hotel investments, with the total hotel industry deal value reaching $401 million, a four-fold increase from 2022. The number of greenfield projects signed in India will also jump by approximately 8,000 rooms in 2023, reflecting hotel developers' confidence in the long-term growth of the industry. HNI and institutional investors will account for the largest share (31%) of investments in 2023, followed by real estate developers (27%) and owner-operators (11%).
According to JLL, last year saw the country record number of hotel signings (25,176 rooms) and openings (12,647 rooms), most of which were concentrated in second-tier cities. Total signings for the fourth quarter of 2023 were 82 hotels, bringing the total number of rooms to 8,741.
Like other regions, RevPAR, ADR and occupancy rates in India took a big hit in 2020-21. However, the industry recovered from 2022 onwards, with ADR and RevPAR exceeding pre-pandemic levels and occupancy rates also improving significantly. As per the JLL report, RevPAR across the country grew 15.8% during October-December 2023 compared to the same period in 2022.
Hoteliers have been quick to respond to this growing potential and have been building their portfolios in India. IHG has announced plans to double its hotel count over the next five years and has signed 13 new deals in the luxury, premium and budget hotel segments in the country. With an eye on emerging markets, Hilton has also been expanding its portfolio, announcing plans to triple its India portfolio from 26 to 75 hotels in three to four years. The company has already planned 20 hotels and is preparing to open up to six hotels this year. Marriott, the largest hotel chain outside India across the country, recently opened its 150th hotel in India following record signings in 2023 and Q1 2024. Betting big on the spiritual tourism segment, Marriott is set to open 12 hotels this year. Last year was also a big year for Accor, which signed a record 11 hotels and added nearly 1,000 rooms to its India portfolio. The French hospitality company, which currently owns 62 hotels, plans to open six hotels this year across the premium, midscale and economy segments, as well as three luxury and lifestyle hotels.
The travel, tourism and hospitality sector has witnessed tremendous growth and this trend is expected to continue over the next few years. Growth is expected to be driven by a significant increase in domestic tourism, rise in destination weddings and celebrations, popularity of spiritual tourism, growing interest in leisure and business travel to India, and an expanding hospitality industry.
