Hotel Industry in India 2019

Description

In India, the tourism industry plays a significant role in generating employment and earning revenue from foreign exchange. The hospitality sector, being a part of the travel and tourism industry, is greatly affected by the expansion of the industry. The government has taken several steps to make India a global hub for tourists to boost the Indian hospitality industry.

Market insights:
India accounts for the highest number of domestic leisure travellers in the world. Business travellers are gradually increasing in number, owing to the rapid growth of the IT sector in India and the emergence of several global companies. The KPIs used by the industry to measure business development and management of hotels are average room rate (ARR) and revenue per available room (RevPAR). ARR of the hotel industry in India stood at INR 5,844.81 in FY 2019 as against INR 5,527 in FY 2016, and is expected to reach INR 6,707.46 by FY 2024, expanding at a compound annual growth rate (CAGR) of ~3.16% during the FY 2020-FY 2024 period. RevPAR of Indian hotels stood at ~INR 4,002.76 in FY 2019 and is expected to reach
INR 5,305.91 by FY 2024. After the onset of FY 2020, the Indian hotel industry is anticipated to expand at a promising rate, since India will be hosting the ICC Men’s World Cup in 2023, which would increase the foreign tourist footfall in the country. Difficulties in talent management act as a significant challenge for the hotel industry. Insufficient supply of quality workforce and increased competition for skilled employees from competing service sectors like aviation have raised the attrition rate in the industry.

Segmentation insights:
Based on type, the hotel industry in India can be segmented into independent/unbranded hotels, alternate accommodations, new-age hotel chain, and branded/traditional chain. The independent/unbranded segment comprises more than ~70% of the total available hotel rooms. Alternate accommodation is the second-largest segment, owing to the growing popularity of homestays among tourists. The new-age hotel chain is expected to witness the most promising growth during the forecast period, from ~7.36% in FY 2018 to ~14.80% in FY 2024. Moreover, the branded/traditional hotel segment, which dominates the organized sector, accounts for about 5% of the overall hotel industry, in terms of room supply.
Based on the city-wise supply of rooms, tier I cities like New Delhi and Mumbai reported the highest number of rooms, followed by Bengaluru and Chennai, and together they account for ~30% of the total market share in the country. About 27% of the industry is dominated by smaller cities where the market is mostly unorganized and is primarily dominated by independent/unbranded hotels.

Government initiatives:
The hotel industry in India is highly dependent on the tourism sector for business, and hence, government initiatives, by enhancing tourism, play a crucial role in aiding the expansion of the industry. The Ministry of Tourism, along with the Ministry of Civil Aviation and The Ministry of Railways, promotes tourism in the country.
Schemes like SWADESH DARSHAN (Integrated Development of Tourist Circuits around Specific Themes), PRASHAD (National Mission on Pilgrimage Rejuvenation and Spiritual, Heritage Augmentation Drive) and the promotion of E-Visa has been taken up by the Ministry of Tourism to increase the tourist inflow in the country.
Vision 2040, UDAN – Ude Desh ka Aam Nagrik and NABH Nirman are a few initiatives taken by the Ministry of Civil Aviation to boost air connectivity, which would increase hotel guests in even the remote corners of the country.
As domestic travelers constitute the largest guest share of the hotel industry, the Ministry of Railways is improving rail infrastructure throughout the country to ease traveling for domestic trips.

Competition analysis:
The hotel industry in India is highly fragmented with numerous small and unorganized players dominating the market. It has witnessed a shift in favor of the mid-market and budget hotel segments, along with the development of hotel aggregators in the budget segment that has led the massive and unorganized hotel industry towards consolidation.
Based on existing inventories among organized players, Marriott Hotels India Private Limited accounts for the largest share (~22.35%), followed by Grand Taj Hotels Private Limited, Radisson Hotel Group, Accord Hotels and Resorts Private Limited, and ITC Hotels.

Companies covered:
• Bharat Hotels Limited
• Hotel Leelaventure Limited
• ITC Hotels Limited
• Lemon Tree Hotels Limited
• The Indian Hotels Company Limited
• Sarovar Hotels Private Limited
• The Park Hotels
• Hyatt Hotels and Resorts
• Marriott Hotels India Private Limited
• Radisson Hotels Asia Private Company