Tier III cities show strongest recovery in hospitality: report

Tier III cities with resorts in India have seen the strongest recovery amid a recovery in leisure tourism. This has allowed these locations to achieve higher average rates than before the pandemic, according to a new report from consultancy Hotelivate.

The company’s 2022 Indian Hospitality Trends and Opportunities report says the recovery in hotel demand in the June quarter was exceptional and businesses outperformed their pre-pandemic performance. India has around 150,000 branded hotel rooms and July and August saw some of the best performance hotel companies have seen in several markets, according to the report. The survey was conducted in 1,364 hotels, 53 businesses and 152,000 rooms in 238 cities and 174 brands. He added that activity is resilient in all markets, especially as leisure venues continue to outperform urban markets; The demand for city hotels has also increased. The return of international travel will continue to benefit the industry over the coming months.

Average room rates increased slightly from 2020-21 due to Indian consumer price sensitivity. Despite the strongest growth in revenue per available room, average five-star hotel rates in India are still below their peak in the year 2007-08, when five-star hotels sold at an average rate of €11,200 per night. In FY22, rates had fallen to €8,890 from €10,679 per night in the pre-pandemic FY20 year.

During the peak years of 2005-2006, the overall hotel occupancy in India across all star categories reached 71.5%. This number dropped to 34.5% in 2020-21 when the pandemic hit. The figure has now returned to 50.3%. “In terms of occupancy nationally, the industry has passed the 50% mark, with the national average price just slightly below €5,000 in 2021-22. We are about to reach out and expect FY23 hotel occupancy to reach over 68% (revised from our original estimate of 64.9%) and average daily rates nationwide will be closer to that €5,700,” said Achin Khanna, Managing Partner, Strategy Consulting at Hotelivate, a hospitality consultancy.

From a cross-brand perspective, Indian Hotels Co. Ltd continues to be number one. Despite having the largest inventory in the country, Marriott ranks second due to its higher room-to-hotel ratio compared to IHCL. Interestingly, Khanna said they could see Indian-origin brands having a higher number of assets in the country compared to their international counterparts. Mumbai topped the top 15 Indian cities in average number of rooms per hotel. It has about 224 rooms in each hotel while Delhi has about 206.6 rooms per hotel. Hotels in Hyderabad and Greater Noida follow with 181.7 and 177.8 rooms respectively.

India plans to add around 59,238 rooms between 2022 and 2027. Of this total, 6.4% will be luxury developments and 27.5% premium hotels. Most hotels in India will be in Bengaluru with 20,824 rooms by 2027, followed by Goa with 11,054 rooms. Chennai will add 10,604 rooms by this year. Currently, Bengaluru has 14,022 rooms, Chennai has 9,763 and Goa has 8,244.

The report adds that inflationary pressures, supply chain disruptions and economic volatility have led to higher operating costs for hotels. In addition, high inflation has led to an escalation in construction costs, which also affects hotel development. Construction input costs increased approximately 10% from the prior year and are expected to increase further in 2022-23.

Source: The Royal Mint

About Tammy N. McFarlane

Check Also

A new skyscraper Fairmont hotel will open in Dubai

Fairmont Dubai Skyline is the brand’s 6th property in the UAE… Dubai is getting its …