Gold rush in the hotel business: businesses find growth reserves and expand

The Ramada Encore hotel in Bareilly, owned by a book publisher, has become the property of pharmaceutical company Mankind Pharma, which entered the hospitality sector last year with the Courtyard by Marriott Aravali Resort and earlier this year acquired The Westin Rishikesh Resort & Spa. Kaushalya Logistics has also decided to enter the hospitality sector by building a 200-room Holiday Inn hotel on the Delhi-Mumbai highway in Udaipur. According to ET, an increasing variety of entrepreneurs across segments and industries, ranging from large pharmaceutical companies and regional industrial groups to auto dealers, school owners and book publishers in tier II and tier III cities, are deciding to step into the hospitality industry.

With the growing Indian economy, the demand for''Hotel services are expected to be high, as Gaurav Sharma, IHCL vice-president, development, told ET. He also added: "Consequently, significant capital investment is pouring into the hotel industry as there is growing confidence in the growth potential of the hospitality industry. "

Deepak Jain, founder of MayFair Consultants, also confirmed that many entrepreneurs are actively interested in investing in the hospitality sector because of its growth potential. "We have noticed diversity in tier two and tier three regions where business owners are looking to diversify," he said.

Kiran Andikot, regional vice president of hotel development for Marriott International in South Asia, also noted that more corporate groups are expanding their''hospitality activities. He added: "For example, Courtyard by Marriott Gorakhpur hotel will open soon and also recently signed a contract for Ayodhya Marriott hotel. We are seeing increased interest from regional corporate and industrial groups in hotels as part of their diversity strategy. "

Hotel companies are also expanding to capitalize on growth opportunities in the hospitality sector. ITC-backed Fortune Hotels, Lemon Tree Hotels and Royal Orchid Hotels, as well as a number of other large and mid-sized hotels, are opening new properties or acquiring small/undesignated hotels to meet the increase in demand. For instance, IHG Hotels & Resorts, in partnership with Nikhil K. Raheja and Vijayta Raheja, is planning to expand its portfolio in Mumbai by launching a new five-star brand voco and''have started traveling after a long stay at home due to pandemic restrictions. There are several trends in the hospitality sector, both economic and social, that lead to the expectation that the hospitality sector will remain stable in the coming years, which in turn attracts investment.

Travel is no longer a one-off trip to the mountains. With the Indian economy growing and people's purchasing power increasing, traveling is becoming an important part of their lifestyle. The large number of Generation Z Influencers and Millennials who are actively traveling play a key role in the growth of tourism. Staycation, workcation and traveling alone are the new trends.

Infrastructure expansion in India is driving growth''traveling. Today, there are high quality highways that have cut travel time by half to popular destinations.

The government is investing heavily in improving rail trains and stations, as well as aviation infrastructure. New and faster trains like Vande Bharat and air connectivity to small destinations are boosting travel. Easily available vacation loans also stimulate travel. More travel means more demand for hotels. New trends like traveling weddings are also contributing to hotel demand. Since joint''Families are giving way to nuclear families, with guests increasingly choosing to stay in a hotel rather than with their hosts. The surge in spiritual tourism, made popular by television and social media, has also led to an increase in hotel construction in pilgrimage destinations.

Thanks to better infrastructure, changing preferences and social norms, more and more Indians are traveling and staying in hotels. These are long-term trends and not the result of increased demand for hotels post-pandemic, which are expected to support the hospitality sector. So not only are hotel companies expanding, but other businesses are willing to invest in hotels.

There is a boom of deals in the hotel industry.

Because of the growth in travel, which is considered''s long-term trend, the hotel industry is experiencing a flurry of activity. According to a report by consulting firm JLL titled 'Indian Hotel Industry Investment Trends, H1 2023', deal volume in the Indian hotel industry in the first half of 2023 amounted to $175 million, which is 1.4 times higher than last year. In comparison, for the full year 2022, deal volume was $73 million. "In countries like Thailand, the annual deal volume is around 300 million dollars. There is no reason why India cannot reach that level in the next two years," JLL Hotels & Hospitality Group APAC (Asia Pacific Region) head Nihat Ercan told ET last month. Hotel deals in India in''mainly carried out by real estate developers (38%), followed by high-net-worth individuals (32%), private equity funds (24%) and hoteliers (5%).

"The hotel sector is increasingly being taken into consideration by investors. In terms of performance, we probably have the sharpest V-shape recovery in Asia and we continue to grow," said Jaidip Dang, group managing director, hotels and hospitality, JLL India. According to the JLL report, high-net-worth individuals have diversified their investment portfolios in India to include hotels as assets and the completion of Emergency Credit Line Guarantee Scheme (ECLGS) may lead to more tradable assets in the market.

India still holds a very small share''in the Asia-Pacific hotel deals market. In Asia Pacific, the investment is expected to reach $8.7 billion by 2023, mainly driven by Japan, Australia, South Korea, and China.