What’s brewing in the tourism and hospitality industry in India.

The news

The Indian Hotels Company Ltd (IHCL), the parent company of Taj Hotels, announced its expansion plan last Tuesday. It is targeting to double the hotel count to over 700 in the next five years from 350 currently.

Large companies, being sector leaders, often reflect macro trends in the industry. The aggressive expansion plan by IHCL marks the potential growth of the hospitality and tourism industry in India.

Let’s understand what’s happening in the hospitality industry.

Snapshot of the Hospitality Industry

Every industry has specific metrics to evaluate company performance. While there are many ratios and metrics, three are commonly used:

Revenue per available room (RevPAR): Indicates how well a hotel generates revenue from its available rooms.

Occupancy Rate: Shows the percentage of rooms booked in a hotel. A higher occupancy rate typically leads to higher RevPAR.

Average Daily Rate (ADR): It represents the average price paid for each occupied room.

According to a JLL report, India’s hotel industry saw growth in the July-September quarter of 2024, with RevPAR growing at 10.8% year-on-year (YoY).

The occupancy rate for the branded and organized hotel sector stood at 67.5% in FY24, the highest in a decade while the Average Daily Rate (ADR), reached an all-time high mark at ₹8055.

What’s driving the growth?

One of the major reasons for growth in the hospitality industry is the rise in tourism. Like earlier days, tourism is not just limited to summer vacations or pilgrimages.

From grand plans to last-minute trips and everything in between, it has evolved into different versions, such as staycations, workations, backpack trips, medical & wellness tourism, etc.

As per MakeMyTrip’s ‘India Travel Trends Report’, the number of people taking three or more trips per year has grown by 25% in 2023 as compared to 2019, with 75% of Millennials & Gen Z surveyed preferring traveling over material goods.

You see, the hospitality sector is the major beneficiary of increasing tourism. For example, as of March 2024, the average daily number of visitors to the Ram Mandir in Ayodhya was 1–1.5 lakh.

The pilgrims and other such travelers are more likely to spend on hospitality during their journey, benefiting the industry and economy at large.

The CMD of Lemon Tree Hotels, Patanjali Govind Keswani, recently stated that with the right government support, India’s tourism and hospitality sector could solve 50% of the country’s employment challenges, given its size, vast cultural diversity, and rich history.

To conclude

The hospitality industry in India is on an upward trajectory, driven by rising tourism and evolving travel preferences among younger generations.

Metrics like record-high occupancy rates and ADR underscore the sector’s resilience and growth potential, create employment opportunities, and drive economic growth, while redefining travel experiences in India.