Hospitality sector grows with 10.8 per cent YoY RevPAR in Q3 2024: JLL

India's hospitality industry is thriving in 2024, showcasing steady recovery and growth. The latest data from JLL’s Hotel Momentum India (HMI) report reveals a 10.8 per cent Year-on-Year (YoY) increase in Revenue Per Available Room (RevPAR) in Q3 2024. This growth is attributed to rising Average Daily Rates (ADR) across most major markets, even as occupancy levels remain stable.

 Key Highlights:

- RevPAR Growth: The hospitality sector recorded a 2 per cent growth in RevPAR Quarter-on-Quarter (QoQ) compared to Q2 2024, marking consistent progress in the industry.

- Leading City Markets: Hyderabad topped the list of cities with a 23.6 per cent YoY growth in RevPAR, followed by Chennai with 17.7 per cent and Mumbai with 16.8 per cent.

- Branded Hotel Openings: A total of 30 new branded hotels, adding 1,988 rooms, were launched in Q3 2024. Notably, around 80 per cent of these rooms were located in Tier-II and Tier-III cities.

- Conversions: Of the 96 branded hotel signings (adding 10,686 rooms), 12 were conversions from existing properties, making up 11 per cent of the total inventory.

Market performance 

Hyderabad saw the most substantial increase in RevPAR, reaching 23.6 per cent. This growth was fueled by a surge in both corporate and leisure travel, reflecting the city’s rising popularity for business events and tourism. Chennai posted a 17.7 per cent YoY growth, driven by strong domestic demand and a growing focus on Meetings, Incentives, Conferences, and Exhibitions (MICE) tourism. Mumbai, the financial capital, followed with a 16.8 per cent rise, highlighting its appeal as a hub for business and high-profile events. Cities like Bengaluru, Delhi, and Goa also demonstrated solid performance. While occupancy levels remained largely steady compared to Q3 2023, improved ADRs significantly boosted RevPAR figures.

Tier-II and Tier-III cities shine

One of the most striking trends in Q3 2024 was the growing focus on smaller cities. Nearly 80 per cent of the 1,988 newly opened hotel rooms were in Tier-II and Tier-III locations, including Tirupati, Udaipur, Ranchi, and Mussoorie. These destinations are gaining prominence for both leisure and business travel, supported by improved infrastructure and connectivity. Conversions played a notable role in Q3 2024, with 12 hotel properties transitioning into branded operations. This accounted for 11 per cent of the total hotel signings in the quarter. Conversions reflect the growing interest of smaller operators in aligning with established brands to attract more guests and improve profitability.

Upcoming trends and opportunities

Looking ahead, Q4 2024 is expected to further strengthen the hospitality sector due to the following reasons:

- Festival Season: The festive period, including Diwali and Christmas, will drive high room bookings across cities.

- MICE and Weddings: Demand for corporate events and weddings is anticipated to remain robust.

- Improved Connectivity: Better air and road connectivity is making smaller cities more accessible, boosting travel demand.

The growth in the hospitality sector has broader economic implications:

- Employment: Hotel expansions and new openings are creating jobs in Tier-II and Tier-III cities, promoting regional economic growth.

- Tourism Revenue: Both domestic and international travellers are contributing to increased tourism spending.

- Infrastructure Development: Rising demand is encouraging investments in infrastructure, such as better airports, roads, and urban facilities.

Challenges ahead

Despite the positive momentum, the industry faces challenges such as:

- Rising Operational Costs: Inflation and higher energy prices are putting pressure on hotel operating margins.

- Competition: As more properties enter the market, maintaining high occupancy and ADRs could become challenging.

- Global Uncertainties: Fluctuations in global economic conditions could impact international travel demand.

“Backed by strong performance of hotels across India, we continue to see investors moving money in this asset class. There is strong momentum on both greenfield developments as well as operating assets across business and leisure markets. Although the summer season has brought down corporate room night demand in Q3 2024, the sector continued to demonstrate growth in average daily rates (ADR) compared to Q3 2023. Looking ahead, the sector's performance in the upcoming quarter appears promising due to the festival season, general rise in domestic corporate travel, the strengthening of MICE events, weddings, and other social gatherings”, said Jaideep Dang, Managing Director, Hotels and Hospitality Group, India, JLL.