India is on track to lead Asia Pacific in 2024 in terms of hotel openings, claiming 25 per cent of the entire region’s new launches by the end of the year, according to Lodging Economics. The advisory firm also predicts that the country could continue to be Asia’s biggest growth story for hospitality across 2025 and 2026, with soaring demand set to sees the country responsible for the largest share of Asia’s new hotel openings over the next two years.
Growth drivers
Driving this growth is a heady mix of Indian new wealth, the expansion of religious and cultural tourism, a rise in branded properties, and a national infrastructure race in the world’s most populous country. “The hospitality boom isn't just limited to major cities like Delhi, Mumbai and Chennai. Tier-2 and tier-3 cities are experiencing a parallel surge fuelled by economic expansion, increased business activity and a growing middle class with disposable income,” says Rami Kaushal, managing director for consulting & valuation services, India, Middle East & Africa at CBRE.
CBRE research suggests that tier-2 cities such as Jaipur, Amritsar, Lucknow, Agra and Udaipur will be in line to benefit from an uplift in rooms as a result of this new supply. These cities correspond with key sites for “spiritual and experiential tourism experiences”, Kaushal says. Meanwhile, as global brands enter and expand their operations, “the focus for new room supply between 2024-2026 is expected to be on upscale, upper-upscale and luxury segments, accounting for nearly 55 percent of the total pipeline”, he notes.
JLL data shows that in the third quarter of this year, India saw some 96 branded hotel signings comprising 10,686 rooms. Branded hotel openings comprised 30 hotels with 1,198 keys, of which approximately 80 per cent of the total number of keys were located in tier-2 and tier-3 cities, including Tirupati, Udaipur, Ranchi, and Mussoorie.
Institutional interest
From an investment perspective, the country’s real estate capital markets are attracting further institutional and cross-border capital, which is having positive effects on hospitality volumes.
JLL predicts that this year’s hotel transaction volumes could exceed $413 million, compared to 2023’s buoyant figure of $401 million. Tier-1 markets are expected to account for 78 per cent of the expected total deals, with 22 percent of transactions in tier-2 and 3 cities.
Experts see a range of asset classes benefitting from the country’s increasing liquidity and maturity. “It’s an exciting time for the market which is becoming more transparent and institutionalised – Blackstone has sponsored the first retail REIT in India, for example,” says Gordon Marsden, head of capital markets, Asia Pacific, at Cushman & Wakefield.
“We have started to see a healthy diversification of private equity investments across multiple sectors within Indian real estate in recent years, as opposed to earlier years where office was the mainstay,” he adds, noting that residential and logistics have been the biggest beneficiaries so far this year. “Retail and hospitality are also seeing benefits from India’s growing economy, and this all helps investors underwrite India as an investment destination.”
Investors who want to get into hospitality should bear in mind that India is mostly a development market at the moment, Marsden adds, noting however that “the recent past has been defined by the creation of exit products (REITs) and the sale of income-producing portfolios and assets, really only for the first time”.
He adds: “In India, the luxury housing market is experiencing significant expansion, particularly in regions like Delhi-NCR and Gurugram. This growth is driven by factors such as rising disposable incomes, improvements in infrastructure, and an increased demand for high-end living spaces.”
Fit to travel
Infrastructure-first policies from the recently re-elected government are improving the country’s connectivity. The Ministry of Road Transport and Highways (MoRTH) is constructing on average 34 km of national highways per day, after completing 12,349 km of highways in the country 2023-24, close to its previous record of 36.5 km per day in 2020-21.
Meanwhile, significant progress has been made on the construction of various stations for India's first bullet train. Air traffic is booming too; Indian aviation achieved a historic milestone on November 17 this year, transporting more than half a million domestic passengers for the first time across 3,173 flights.
Interregional travel in India and Asia is one of the region’s big success stories, according to Alan Watts, president, Asia Pacific, Hilton. “Around ten to fifteen years ago, Asia was a long-haul market for Europe,” he says. “There was no Asia for Asia. Now, if you look at in-Asian travel, we see Chinese, Japanese, Indonesian and Indian outbound travellers across the region. Interconnected Asia is big news.”
Major brands
Some of the world’s biggest hotel brands are responding to the high growth environment. Elie Younes, global chief development officer at Radisson Hotel Group, says that the group has more hotels in India than the rest of Asia Pacific, while underlining that “APAC is as important, if not more important, than other regions such as EMEA simply because of the opportunity that APAC represents”.
Several years ago, the group shifted to Asian ownership as a Jin Jiang International Holdings-led international consortium took a majority stake in the firm. Younes adds: “We are a European business which is now Asian owned, which translates into an ability to be more global. We feel local in Asia, we feel local in Europe, and everywhere we go.”
Radisson is targeting a total of 200 hotels in India by 2027, according to managing director and area senior vice president for South Asia Nikhil Sharma, who says that both business and leisure guests are on the radar in tier-3 and tier-4 cities. Brands like Park Inn & Suites by Radisson will be key in capturing the market, he says.
Marriott International sees an opportunity to double its signings from a current base of 153 hotels in India in the coming years, bringing luxury brand Edition to Mumbai as well as targeting smaller cities which are ripe for growth. IHG Hotels & Resorts, meanwhile, wants to double its presence in India to 100 hotels over the next three to five years. The business currently has 46 hotels operating across six brands in the country, including Six Senses, InterContinental Hotels and Resorts, Crowne Plaza, voco, Holiday Inn Resort and Holiday Inn Express. Another 58 hotels are planned to open before the turn of the decade.
Hilton Worldwide will likewise seek to catch up with its peers in the next five years, with plans to quadruple its presence from the current baseline of 29 hotels, according to Watts.
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