Holiday homes are not a new in India, though the segment had not really taken off in the past. For more than a decade, the holiday home segment lay more or less stagnant. But the likes of AirBnB and OYO, followed by rising domestic demand and other factors, have given holiday homes a new lease of life, say hospitality industry players. In fact, the segment witnessed a boom in recent times, due in large part to COVID-19.
As a result, there has been an increased interest from big brands to build villas or holiday homes in tourist destinations that are largely untapped by the hospitality segment.
The managing director of a mid-sized hotel chain, who owns a villa in Himachal Pradesh, says his primary goal of renting out his holiday home was to ensure it is maintained well, even though it doesn’t fetch him high returns. But having a holiday home surrounded by hills was something he always desired.
“Privacy and quality service are the primary reasons why I prefer a villa or staying in a holiday home," says Eshan Dhar, who usually travels with a group of friends and recently visited Jim Corbett National Park,
Dhar, a media professional, added, “I don’t remember the last time I stayed at a hotel. I prefer a villa ... because while on a trip with a large group you wish to enjoy it with your own group of friends or family. Villas or homestays give you that."
The world over, the holiday home segment is driven by international tourism. But in India, it will be driven by domestic tourists and inward investments, an industry expert added.
India has seen a rapid rise in domestic tourism in the past few months due to pent-up demand and a delay in getting visa to travel overseas. The rising demand in domestic tourism will have to be supported by the right infrastructure and impetus to newer segments. According to India Brand Equity Foundation (IBEF) data, domestic travel is estimated to grow to $405.8 billion by 2028.
What’s brewing in the branded homestay segment?
While demand for holiday homes is buoyant, the importance of location and product positioning cannot be overstated — it is important to keep the inventory limited so that one can develop a low-density neighbourhood and command a premium on pricing.
“Usually, we advise our clients to develop no more than 25 villas in a given location. Holiday homes are a luxury concept and luxury has to be limited,” says Jaideep Dang, Managing Director — hotels and hospitality group, South Asia, at JLL.
India needs to add 2.5 million rooms in the homestay segment, according to research by Noesis.
The likes of Tatas, Mahindras, ITC, DHFL and others are investing crores of rupees in various locations across the country, such as Goa, Himachal Pradesh, Karnataka, Kerala, Uttarakhand, and other states to build branded holiday homes. Goa continues to top the chart in the holiday homes segment.
Sanjeev Bhambri, Managing Director of 3B Group of Hotels, says, “I am very bullish on the holiday home/villa segment. After much delay, it has taken off and it is the right time to invest in the branded homestay segment.”
His company is developing properties for the likes of Hyatt, Marriott and others in Dehradun. “While the demand for holiday homes is rising, timely delivery of the property and quality service will be of utmost importance. Thus, in the coming years, branded holiday homes/villas will dominate this segment as service delivery will become a challenge for small players,” Bhambri says.
Hospitality brands prefer quality to quantity in managing such spaces.
Meanwhile, players like Rhythm ResiTel have developed a model in which retail investors can buy resort suite units as a convenient property investment that will yield long-term secured returns as well as capital appreciation. The company offers a return over investment of 8-10 percent.
Vaibhav Jatia, Managing Director of Rhythm ResiTel, says, “While the tourism space is booming, having a new and asset-light model is crucial for the hospitality sector.”
Cash-flow management will be critical for this model to take off, industry experts feel. The company has witnessed a larger appetite among non-residential Indians residing in Gulf countries for this segment, who are looking at investing in homestays/villas that are managed by developers but fetch them returns.
As the appetite of domestic tourists grows, this burgeoning segment is riple for the picking.
