2023 Outlook
The outlook for the Indian hospitality industry remains positive. Domestic demand will continue to be strong and international travel is also expected to pick up, despite the looming threat of a recession in the US and Europe, growing global geopolitical issues, and an increase in COVID cases in some countries. In addition, the G20 presidency of India and the fact that India is hosting a number of international events, including the ICC Men’s World Cup and the likes of the Dior global event in Mumbai, will increase demand for hotels in the cities where these events will take place.
Union budget 2023
The Union Budget 2023 iterated the fact that the Government is recognizing the importance of the tourism sector as an employment generator and is looking to promote the sector on a mission mode with active participation from all stakeholders, including public-private-partnerships.
The revival of 50 additional airports, heliports, and water aerodromes to increase regional air connectivity and the development of fifty tourism destinations as a complete package for domestic and international tourism, as well as the government’s continued emphasis on infrastructure development, including the significant investment in railways and last-mile connectivity, bode well for the sector. The Government’s stated objective to actively promote tourism is a welcome announcement. Furthermore, the reduction in personal income tax will increase disposable income, which will drive demand in the tourism and hospitality sectors.
Transactions Outlook
Transactions will continue to remain sluggish in the near term in an otherwise gradually maturing hospitality market due to the ongoing conflict between buyer and owner’s expectations. Buyers must recognize that as COVID was an anomaly, the asset’s valuation should take into account both its historical (particularly pre-COVID) and anticipated future performance. On the other hand, owners who want to exit or reduce debt should realistically take advantage of the improving market sentiments. With improving market sentiments and a bullish outlook for the hotel sector,Indian hotel operators may explore the IPO route in the medium term. Hotel companies – both operators and owners – may now consider ramping up their operations to achieve the scale and size needed to go public. Using the IPO route will help hotel companies in raising funds for expansion plans, deleveraging their balance sheet, or providing an exit to existing investors. Furthermore, new listings of good-quality hotel companies will also provide the depth needed to create a hotel industry specific index that can be used as a benchmark to track the industry’s performance, helping investors make more informed decisions going forward.
The way forward
The Indian hospitality sector is expected to see accelerated growth in 2023, in spite of ongoing global headwinds and the uncertainty brought on by the occasional COVID-scare. This will be driven primarily by buoyant domestic demand, the revival of inbound travel, and the Indian government’s renewed emphasis on the expansion of the tourism industry, which is expected to contribute US$250 billion to the country’s GDP by 2030. The government also intends to release the National Tourism Policy soon to promote sustainable and inclusive tourism growth in the country. The hotel sector should develop strategies to take advantage of the short- and long-term opportunities that are emerging as the Indian tourism industry gains momentum.
Advantages of G20 presidency
Over 200 G20 meetings are expected to be held across 55 destinations in the country during India’s G20 presidency till November 2023. The Indian hotel sector stands to gain significantly from this development, as there will be substantial incremental demand for hotels in the cities where the meetings will be held. Additionally, the G20 meetings are also expected to help inbound tourism to recover the lost ground as the Ministry of Tourism intends to take advantage of this chance to promote India as a “major tourism destination”. Necessary initiatives, such as visa reforms and traveler-friendly immigration facilities at airports, are also expected to be implemented to make travel to the country easier for inbound visitors. The G20 presidency has coincided with India’s efforts to establish itself as a global MICE destination, and the smooth organization and completion of these high-profile 200+ meetings will support those efforts.
Here are the top trends to watch in the year ahead
1. Rise of new age wellness resorts
2. Bleisure travel will become even more popular
3. Personalization will increase
4. Growth of medical tourism
5. Reimagining F&B by Partnering with Branded Restaurants
6. Leisure property development will grow in India
7. The rise of alternate accommodation
8. Global hotel chains will expand their brand portfolio in India
9. Net-zero hotels will be the next step in sustainability
