Indeed, India’s hotel industry surged back to life, driven by a post-covid uptick in travel. Double-digit revenue growth was propelled by domestic leisure trips, meetings, incentives, conferences, and exhibition (MICE) events, the G20 Summit, and the return of business travellers. The added excitement of the ICC Cricket World Cup saw hotels fill up, and unorganized accommodations were abuzz.

Many companies witnessed a historic year, achieving their best results during the first two business quarters. City hotels, in particular, reached unprecedented lifetime highs during this period. “It was an important year because covid-19 had disrupted business on and off in 2020-22. Occupancies, and average room rates across top hotels saw unprecedented rates,” Kapil Chopra, director, Untitled Hotels and Resorts, which runs luxury brand, Postcard Hotels, said.

The year 2024 could see consistent growth, especially in domestic travel. Premium hotels across India witnessed impressive occupancy rates of 70-72%, with average room rates exceeding ₹6,000 a night, according to ratings agency Icra. Hotel revenues saw a robust 20% increase over 2022 while operating margins surpassed the 30% mark.

Occupancy rates for top hotel firms, with an inventory of 70,000 rooms, are expected to rise by 10% compared to the previous year, to 74%, according to Crisil. This projection is well above pre-covid levels of 66%. Besides, room rates are expected to rise to ₹8,000 per night, up 8-10%.

The big picture looks good. “I don’t know how economies around the world will do in the next five years, but I believe it will be better, as there is a direct link between GDPs and travel. Around the world and in India, there will be more travellers, advancements in AI will make it easier to travel,” said Booking Holdings chief executive, Glenn D. Fogel, in an earlier interview in November.

The key highlight, according to Chopra, is that the hotel business is still not surpassing the 30% year-on-year growth. Structurally, the Indian hospitality sector is not constructing truly inspiring and iconic luxury hotels that would attract visitors, instead, it is focusing on cookie-cutter properties, and missing the opportunity to showcase India’s splendour, he added. “For this kind of an economy, companies need to build aspirational products.”

Yet, a concerning aspect is that India continues to receive fewer international travellers than 2019, presenting a potential challenge. To address the issues, Indian Association of Tour Operators, representing 1,700 operators, approached the Prime Minister’s office this month with suggestions, such as incentives for inbound tour operators, aggressive overseas promotional activities, besides assigning trained officers to the Indian embassies.

It is well-established that countries actively promoting themselves to others tend to get the highest number of travellers. It is worth noting that earlier this year, India cut its budget for overseas tour promotions, Incredible India campaign, from ₹524 crore in 2021-22 to ₹341 crore in FY23 and a mere ₹167 crore for FY24, raising doubts about how long it will take for international travellers to return to the levels seen before the pre-pandemic times.

Besides, India is grappling with a significant talent shortage in the hospitality industry. While there are approximately 10,000 seats available to hotel management graduates annually, only 7,000 of these seats are being occupied. In practical terms, a third of the prospective workforce has either opted out, or preferred joining other sectors.

Hospitality is known to have gruelling working conditions, with low salaries, and the talent story is under severe stress, said experts. Some of the best professionals are joining other service-related sectors, they added.

“Although 2024 might not show any significant change in hotel building pipeline, we will have to see how the economy does till 2029, since the Indian domestic travel market is very buoyant now, and hotel companies are not really worried about international travellers coming in,” added Chopra.

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Published: 28 Dec 2023, 09:30 PM IST