Mad About Markets: Opportunities for Indian hotel industry post pandemic

The global short stay market is about a trillion dollars currently, impacted in 2021 by COVID-19. However, it is expected to double to near $2 trillion by 2030. Within that, the Indian market is expected to grow 5 percentage points faster at 13 percent than the global market at 8 percent.

As per multiple estimates and some back of the envelope calculations, the Indian hotel industry was around Rs 80,000 crore in 2020, pre-pandemic, a jump from near Rs 50,000 crore in FY15. However, with a massive decline in FY21, it is expected to recover to near Rs 70,000 crore over the next 2 years.

We have about 1.46 lakh hotel rooms in India as of FY21 this number too, is expected to approach 1.8 lakh crore over the next 5 years that is nearly 30 percent addition.

Achin Khanna, Managing Partner at Hotelivate said, “Demand actually eroded a fair bit through the last fiscal and that was an unusual occurrence, to say the least. But it has come back in a good measure already in the recent months. To give you perspective, while occupancy fell by almost 50 percent in FY21 we are seeing occupancies in most leisure markets closer to the 60 percent mark this year. In some urban markets, also breaching the 50 percent threshold already. So you are seeing recovery from a demand standpoint, I think a more holistic and wholesome recovery is yet to be on the cards and in our view that is likely to happen by FY23.”

Online penetration of hotels is likely to increase from 33 percent in 2020 to 50 percent in 2025, this is an important growth trigger given the rising growth in India's internet economy.

Remember, 92 percent of India' hotel industry is still unbranded. Consumers have started to prefer the comfort of branded hotels post the pandemic.

Appetite for quality supply has grown in recent years as the concentration of inventory in India’s top 10 cities has reduced and broadened out to many newer and smaller towns, and this trend is likely to continue. This is in line with the air passenger traffic increasing in smaller cities too.

The big moment of the hospitality world came by with the rise of the internet and the birth of tech-based hospitality solutions like online travel sites, global aggregators like Airbnb, our very own OYO, SaffronStays, Vista Rooms and multiple others.

Archana Ram, VP - Real Estate & Devt, Indian Hotels said, “I think through the pandemic, we have seen a lot of new avenues for our business. We have had revenge travel, we have had a staycation, we have Bizcation, and we have also had our entire homestay segment, which is ‘Ama’ that we launched just pre-pandemic really taking off. Having said that, of course, leisure has been predominant in this pandemic period. But we do expect eventually business travel to also come back to pre-pandemic levels. But what is going to be very encouraging is that the pandemic has thrown open an entirely new avenue of income and we see that sustaining, even beyond the pandemic. So in addition to your traditional sources of revenue, you now have additional sources of revenue.”

Devendra Parulekar, Founder, Saffron Stays said, “This business had always been constrained by supply. Before COVID nobody used to invest in a second home because they were never sure of whether this house will be maintained, managed, monetised. But now post COVID I think what has happened is the credibility of players like us has given a lot of stability and assurance to these investors. That is why the supply that is going to come through is absolutely fantastic. It is not some old refurbished home, it is high quality, good quality supply that is coming through.”