The hotel sector aims to conclude the year with a 63-65% occupancy rate, marking a rise from the previous year’s figures.
The leisure sector’s sustained growth, coupled with a resurgence in international tourism, propels the Indian hospitality industry in 2023. Despite the positive momentum, industry markers such as total transaction volumes and occupancy rates have yet to surpass 2019’s pre-pandemic highs.
The structured hotel sector, boasting roughly 200,000 branded rooms nationwide, predicts closing the year with occupancy levels between 63-65%. This reflects growth over 2022 (a five-percentage-point leap) but remains 1-2 percentage points shy of 2019’s figures. Noteworthy is the fact that higher pricing across the board meant the revenue disparities are not as apparent.
The average room rates have surged, posing a significant cost for consumers. An exclusive report by leading hospitality industry consultants revealed a substantial rate hike over 2019.
This year, hotel guests encountered room prices around ₹7,200-7,400 on average among premier hotel chains. This rate marks a 20% increase year-on-year and stands 22% above 2019’s rates, according to HVS Anarock’s findings.
The escalation has also led to a 30% swell in Revenue Per Available Room (RevPAR) to ₹4,600-4,800 in 2022, a figure 20% ahead of 2019. RevPAR reflects the revenue generated per available room, combining the average daily room rate (ADR) with occupancy levels.
Mandeep S. Lamba, HVS Anarock’s South Asia President, comments on the record-high travel demand. To capitalize, hotel groups are strategically expanding, particularly in tier II and III cities, aligning with the surge in demand.
JLL India Reports Dip in Hotel Transactions Despite Increased Room Additions
JLL India’s analysis reveals that the Indian hospitality sector’s transaction volumes remain at a third of what they were in 2019. Despite a downturn, there have been significant investments in hotel sales. In 2019, transactions in the sector reached ₹5,850 crore, but from January to November 2023, these figures dropped to ₹2,050 crore.
The research accounted for various hotel projects, including new developments (greenfield), upgrades to existing ones (brownfield), and rebranding initiatives. Notably, greenfield projects average 4-5 years to operationalization, whereas brownfield and rebranding efforts take considerably less time.
India’s starred hotels are still trailing behind their 2019 occupancy levels by 2.9%, with only a modest 3.4% increase over the past 11 months compared to 2022.
In a promising trend, the organized hotel segment saw an addition of approximately 9,900 rooms in 2022. This growth accelerated between January and November 2023, witnessing the introduction of more than 12,400 rooms, marking a 25% increase over the entire previous year. Significantly, 60% of these new rooms are located in tier-III areas, while tier-II cities contributed 34% of the total new supply.
Jaideep Dang, the managing director of the hotels & hospitality group at JLL India, forecasts a surge in demand for hotel rooms in the medium term, likely to exceed the supply. According to Dang, while tier-I cities have plateaued in growth, tier-II and III cities are rapidly and robustly meeting the demand for hospitality services.
room rates from the previous year. JLL’s 2023 calendar year dealings amounted to ₹1,000 crore, encompassing 900 hotel rooms.
Stepping into 2023, the Indian hospitality sector’s investment volume skyrocketed by more than 250%, with ₹2,050 crore invested compared to ₹580 crore in the prior year.
The year’s trends include diverse transactions such as individual asset sales and greenfield airport hotel leases. Yet, there’s been a notable rise in investments due to National Company Law Tribunal (NCLT) cases, primarily in debt-laden, high-value properties in robust markets like Mumbai and Bengaluru.
Greenfield developments are resurging, and investment trends favor high-quality, operational assets in both established and emerging markets.
Up until the third quarter of 2023, the industry has seen the signing of 16,300 hotel keys across different segments, with the midscale category capturing 45% of these signings.
Tier III cities accounted for over 55% of new signings, with a growing preference for management contracts over franchise agreements.
