A new trend? Indian Hotels sees big opportunity in business travel being combined with leisure

Hotel stocks are among the best performers in the past year. While the Sensex and Nifty have gained between 5 percent and 7 percent in year-on-year terms, Indian Hotels is up 54 percent, Lemon Tree Hotels is up 48 percent and EIH is up 25 percent.

Leading hotel industry consultant, Horwath said that the big story of 2022 in the sector was the rise of leisure as a vertical rivalling business and the one in 2023 was Air India to place an order for 470 planes. It appears that the hospitality industry is in for a bigger leg up in the coming years because airline and hospitality are intimately connected.

Speaking to CNBC-TV18, to discuss the trends of 2023 in the hotel industry, Puneet Chhatwal, MD and CEO of Indian Hotels Company said that leisure travel is now almost equal to business travel, which is a significant change from the past when business travel was the primary driver of the industry.

One reason for this shift is that people are increasingly combining business and leisure on their holidays. This trend has been growing in popularity over the last few years, but it has accelerated during the pandemic. With more people working remotely, they have more flexibility to travel and take longer trips that combine both work and play.

Chhatwal said, “Leisure across the globe and in all domestic markets has led to the recovery in the sector which was demolished during COVID times.”

“Leisure is evolving in a very new dimension because the term bleisure (business and leisure) was coined maybe 10-15 years ago, but we did not see much of it. Now we see that people are combining business leisure, all that gets counted as leisure but a part of that is business too,” he added.

Despite the challenges posed by the pandemic, the business segment of the industry has grown beyond pre-COVID levels. Chhatwal noted that his company has seen strong growth in this area and expects it to continue in the coming years.

Chhatwal also shared some positive financial news for Indian Hotels, reporting that they expect to see an EBITDA margin of 33 percent in this business cycle. This is a strong figure that demonstrates the company's ability to weather the challenges of the pandemic and continue to grow.

Indian Hotels has also been busy signing agreements and expanding their portfolio. Chhatwal reported that they have signed more than 30 agreements in the last four quarters and have a pipeline of over 70 hotels.

Chhatwal also added that 75 percent of their pipeline is based on management contracts, which means that Indian Hotels will be partnering with other companies to manage hotels rather than owning them outright. This is a smart strategy that allows them to expand their portfolio without taking on as much risk.

Despite the challenges of the pandemic, Indian Hotels has been able to grow and expand, and they have a strong outlook for the future. As people continue to combine business and leisure travel, it will be interesting to see how the industry evolves and adapts to meet their needs.

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