India’s global stature as tourism and hospitality powerhouse

India, which has already overtaken Great Britain to become the world’s fifth-largest economy, is expected to surpass both Germany and Japan in terms of GDP growth to become the world’s third-largest economy by 2030. It is currently one of the fastest growing economies in the world, with strong growth numbers over the past few years despite the pandemic lull. This is due to the country’s resilience to global headwinds and its prominent role in world order, including global organisations such as the G20 (of which India currently holds presidency), the United Nations, the World Trade Organisation, and IMF etc. India is, therefore, expected to play an important role in shaping the global economy going forward. 

This is particularly good news for the country’s tourism industry as both inbound and outbound travel is expected to increase significantly in the coming years. Likewise, the hospitality sector is also expected to register record growth and to be a part of this growth story, all major international hotel chains have started increasing their presence in the country. Meanwhile, Indian hotel chains and brands such as Taj, ITC, Oberoi, and the Leela are winning accolades globally, which is helping boost the visibility of the Indian hospitality industry. Very soon, the level of service offered by the Indian chains will redefine “hospitality” and establish new standards around the world.

The Indian hotel sector has witnessed renewed growth since last year. Although 2022 started on a weak note due to the re-emergence of Omicron, the resulting travel restrictions and state guidelines were short-lived due to the effective handling of the situation by the Government. Subsequently, the travel and hospitality industry made a quick rebound owing to the pent-up domestic demand, with hotel occupancy across India crossing 60 per cent by March 2022. Domestic travel accounted for the bulk of the bookings last year and remained the industry’s primary growth engine. 2022 closed with a nationwide occupancy in the range of 59-61 per cent, which is 15-17 percentage points (pp) higher than the same period in 2021 and just 5-7 pp lower than in 2019.

Although the resumption of international air travel in March 2022 was expected to significantly increase inbound and outbound travel, Covid-related inconsistencies across different countries kept the influx levels low. However, the domestic market kept the demand relatively high and allowed for consistent increases in average room rates. Hotels, particularly in the leisure segment, in many cases, outperformed their pre-pandemic average rates. Both corporate travel and large-ticket conferences and events witnessed a resurgence and helped reshape the fortunes of commercial markets and popular MICE destinations. Even the ‘Big Fat Indian Wedding’ trend made a comeback after two years, as a result of which many destination-based resorts and hotels remained fully booked throughout the wedding season. All these factors helped the industry players in increasing average rates, which further helped in offsetting high borrowing costs and operational costs. Average rates in 2022 remained in the range of INR 6,000-6,300, 37-40 per cent higher than the same period in 2021, and 1-3 per cent higher than pre-pandemic levels. The strong recovery in occupancy and average rates helped India-wide RevPAR to reach INR 3,500-3,700, reflecting growth of 90 per cent compared to 2021.

The outlook for the Indian hospitality industry in 2023 is positive as domestic demand will remain strong, while international travel will also pick up, despite growing concerns about the US and Europe entering a recession, rising global geopolitical issues, and an increase in Covid cases in some countries. In addition, the G20 Presidency of India and the fact that India is hosting a number of global events, including the ICC Men’s World Cup, will increase demand for hotels in the cities where these events will take place. The industry is expected to achieve an occupancy rate of 66-68 per cent in 2023, with average rates of INR 6,800-7,000.

Author Bio: Mandeep S Lamba is President (South Asia), HVS ANAROCK