Indian hospitality sector gears for growth

As the earth completes another revolution around the sun, it is time to reflect on the year that is closing and to build expectations for the year that is to commence. At a time when the whole world is in turmoil with wars raging and nature at its most furious and devastating, the overwhelming emotion is that of gratitude – for socio-economic stability in the country and for a more than satisfying performance of the sector.

While nationwide hotel occupancies have plateaued and are now on the decline after seeing a sustained increase post-Covid, the room revenues continue to rise in comparison to the previous year and when compared to the pre-Covid era. There are some exceptions, of course, to that trend.

Inventory has been added across India. Both hotel signings and openings have grown. Growth percentages have been higher in smaller cities. The hospitality sector continues to be among the top in attracting foreign investment. Indian hospitality has become increasingly popular overseas, and Indian hotel companies have expanded their global footprint. An achievement to be proud of is the market capitalisation of hospitality companies, which has attained record heights, with IHCL crossing a lakh crore of rupees.

Hotels have used technology to enhance customer satisfaction while optimising occupancy and revenue. Continued adoption of sustainable practices across the sector is another positive. The only cloud in an otherwise sunny, bright, and glorious period seems to be the India Inbound, which has not picked up as hoped.

In the honourable Prime Minister, the industry has the best ambassador it could ask for. The Union Budget 2024 has seen a focus on tourism. However, India is still grossly under-roomed. Hotels continue to be burdened with taxes, costly and cumbersome licensing. Financing, skilling, and manpower remain challenges.

The outlook for the sector is positive. The industry looks forward to a budget that announces policy changes that truly recognise the sector’s role as an emerging engine of jobs and sustainable economic and social development and accords it the rightful place in India's economy. Every hotel room creates two direct jobs and several indirect ones. The multiplier effect of the sector is higher than manufacturing or even agriculture. There is an urgent need to change mindsets and not view hotels as elitist.

Infrastructure status at the Centre, industry benefits uniformly across states, rationalisation of taxes, single-window clearance for licences, EODB, incentives for adopting sustainable practices, competitive FARs/FSIs, and land banks are some of the recommendations that the industry has been and will continue to advocate to unleash the real potential of the sector. Aggressive promotion of India overseas by the ministry has been added to the wish list.

At a recent HAI event, Amitabh Kant, India’s G20 Sherpa, said, “I am a believer that if India has to grow, it needs to fire on manufacturing, it needs to fire on services, it needs to fire on agriculture, productivity and on urbanisation. But more than anything else, it needs to grow and expand at rates of about 25 per cent plus, year after year, for the next decade or so in the tourism sector. And this to my mind is very, very doable, considering the very small share that we have in the global tourism market. And if we do this for the next decade or so, we will truly transform the lives of many citizens of India and provide vast segments of jobs in India.”

As essential tourism infrastructure, the addition of hotel rooms will be critical to growing India’s tourism, which has been declared a key pillar of the economy. We have a vision for India, the realisation of which will require strong PPP and regular structured interactions between the industry and government. As Yoko Ono says, “A dream you dream alone is only a dream. A dream you dream together is reality.” With the hope of realising the dream soon, we bid farewell to 2024 and welcome 2025 with enthusiastic optimism!