Introduction

The hospitality sector is experiencing a vibrant resurgence, with Asia, and particularly India, at the forefront of this recovery. As demand and tourist arrivals soar, luxury and domestic-driven hotels in India are witnessing strong performance. This has created a positive investment climate, attracting real estate investors back to the hotel sector, eager to capitalize on the growth opportunities. The pandemic-induced slowdown in new supply and capital expenditure in existing properties is now clearing, leading to a renewed interest in the hotel sector. With strong demand growth, many hotel owners are investing in their assets, resulting in a surge of new projects. This trend is particularly evident in the luxury and lifestyle segments, which have shown remarkable resilience and higher returns, respectively.

Record-Breaking Year for New Hotel Signings

In 2023, the hotel industry in India experienced a record-breaking year for new hotel signings. A total of 29,143 new hotel rooms were added across 328 properties, with an average of 89 rooms per hotel. This marked a significant increase from previous years, with key counts nearly doubling since 2020. In comparison, 2022 saw 20,587 new rooms, 2021 had 15,467, and 2020 saw only 12,433 new rooms.

Domestic hotel operators led the market in 2023, accounting for 56% of the new keys and 72% of the new properties. Domestic properties averaged 70 rooms each, while international properties averaged 138 rooms. This trend shows that domestic operators are focusing on adding more properties with fewer rooms, whereas international operators are adding fewer but larger properties.

Notable Developments and Brand Expansions

2023 has been notable for significant brand signings in India, including the first Waldorf Astoria and Radisson Collection in Jaipur and Hyderabad. The Raffles Udaipur, which opened in 2021, marked the entry of this luxury brand into India. The midscale segment is also expanding, driven by strong demand in tier 2 cities and emerging markets. Greenfield developments are making a comeback, indicating robust future growth.

The Rise of Branded Residences

Globally, branded residences have become a success story, with more hospitality players entering this segment. Luxury operators are leveraging their brands to enhance sales prices, sales velocity, and diversify the buyer pool. This trend is gaining momentum in Asia, with Thailand leading the market. In India, branded residential components are increasingly being included in mixed-use developments, especially in luxury segments, improving the overall experience for guests and residents. Several global giants have ventured into the Indian real estate market with branded residences. Notable entries include Trump Towers, Armani Casa, and Four Seasons Private Residences, which have established a presence in major cities such as Mumbai, Delhi NCR, and Bangalore. The branded residence market in India is growing rapidly, with over 2,300 units, accounting for nearly 10% of the global supply. Prime markets like Delhi NCR hold a significant share, with other key cities including Mumbai and Bangalore following closely. 

Emphasis on ESG and Sustainability

Environmental, Social, and Governance (ESG) priorities have become crucial for hotel owners and operators. In India, ITC Hotels exemplify this trend by integrating sustainability into their core operations. ITC Hotels have implemented extensive measures to reduce carbon emissions and water usage, achieve zero waste generation, and enhance energy efficiency. Their commitment to sustainability is evident in their “Responsible Luxury” ethos, which ensures that luxury experiences are delivered in a sustainable manner. Notably, three ITC hotels—ITC Windsor, Bengaluru; ITC Grand Chola, Chennai; and ITC Gardenia, Bengaluru—have achieved LEED Zero Carbon Certification, demonstrating their leadership in sustainable hospitality. 

The initiatives include the use of renewable energy, sustainable building practices, and community engagement programs. The brand’s dedication to sustainability has not only positioned it as a leader in ESG practices within the hospitality industry but also aligns with the growing guest preference for eco-friendly and socially responsible accommodations. By prioritizing sustainability, ITC Hotels continue to attract environmentally conscious travelers and set a benchmark for the industry

Social Inclusion and Community Upliftment in India

The hospitality sector in India is increasingly emphasizing social inclusion and community upliftment, with notable examples demonstrating impactful initiatives. One such example is Lemon Tree Hotels, which has integrated inclusivity as a core business model rather than a charitable endeavor. Lemon Tree actively hires individuals with disabilities, thereby widening its talent pool and creating essential employment opportunities. This approach not only helps in tackling recruitment challenges but also enhances creativity and attentiveness among staff. The company’s Seven Pillar Model ensures successful inclusivity through leadership, dedicated resources, sensitization, job mapping, partnerships, training, and scaling up efforts. This model has resulted in high retention rates and positive feedback from customers, illustrating how inclusivity can benefit both the business and society as a whole.

Another significant initiative is the empowerment of Denotified, Nomadic, and Semi-nomadic Tribes (DNT) in India. These historically marginalized communities face challenges such as lack of recognition, limited access to essential services, and socio-economic exclusion. Government initiatives, like the Scheme for Economic Empowerment of De-notified Tribes (SEED), aim to address these issues by providing coaching, health insurance, livelihood initiatives, and financial assistance for housing. These efforts are crucial in promoting social inclusion and uplifting these communities, ensuring they can contribute meaningfully to the nation’s progress (CDPP).

Significant Transactions and Market Performance

In 2023, the hotel industry in India saw significant activity with various types of agreements and development projects. Most new hotel keys (rooms) were signed by companies like IHCL, Sarovar Hotels & Resorts, and IHG Hotels & Resorts. Hotels were mostly managed directly by hotel operators, with 84% of the new keys falling under management agreements. Franchising accounted for 12%, and leasing was at 2%.

Regarding the type of projects, 47.6% of the new hotel keys in 2023 came from greenfield projects, which are new constructions. Brownfield projects, which are upgrades or redevelopments of existing properties, accounted for 36.2%. Conversion projects, where non-hotel buildings are converted into hotels, made up 15.3%. There was also a small percentage (0.9%) of expansions to existing hotels.

In 2023, India’s hospitality sector saw a record investment of $401 million, nearly quadrupling the previous year’s amount, according to JLL’s “Hotel Investment Trends – India 2023” report. The sector also achieved record hotel signings and openings, with 25,176 keys signed and 12,647 keys opened. Notably, 54% of these signings occurred in Tier-II cities. The year also marked a decade-high with 22 hotel transactions.

Conclusion

With strong demand, significant investments, and a focus on sustainability and social responsibility, the hospitality sector in India is poised for robust growth. As global investors take notice, the opportunities for further development and innovation in this sector are immense. The positive sentiment and strategic investments suggest a promising future for the hospitality industry in this vibrant region.