Budget Hotels Gaining Momentum

The hospitality market in India, according to a Deutsche Bank report, is believed to be worth 10-12 billion USD. Seventy percent of this comprises of budget hotels and almost two-thirds of India’s rooms supply during 2020-2021 will comprise of budget hotels. Branded budget hotels are believed to be driving the growth of online booking of domestic hotels in the country.

According to a report by Google Travel Trends published some time ago, queries for branded budget hotels in India were growing at a rate of 179 percent year-on-year, in comparison to just 36 percent growth in generic budget hotel queries. Ashok Malkani takes a look at this segment of the hospitality industry to understand the scope for its growth in India and what makes it so popular in the India’s hospitality industry.

There has been an influx of tourists – both domestic as well as foreign – over the last several years in the country. The India’s tourism sector is predicted to grow at an annual rate of 6.9 percent to Rs. 32.05 lakh crore by 2028. In CY 2017, the foreign tourist arrivals in India stood at 10.177 million and reached 2.12 million in CY 2018, up to February. All these are encouraging news for the growing hospitality segment of the country. However, domestic travel is expected to be the primary driver of India’s hospitality industry’s growth. High disposable income and the advent of better locations are possibly driving this growth.

The growth of tourism in India will see a demand for hotel rooms but there is all likelihood of the demand increasing majorly for budget hotels. A survey, released by an online travel portal, points out that people might opt for three or four star rated hotels rather than pay 28 percent GST applicable in the case of luxury hotels, with tariffs of Rs. 7500 and above.

A Promising Market

A budget hotel is a design-to-value proposition where these properties remove unnecessary frills and offer what a consumer really needs.

So what is the scope for the growth of budget hotel segment in the country and what are the other factors, besides rate, which helps guests prefer budget hotels? Also, are they preferred only by domestic tourists?

“The branded mid -market hotels constitute for almost 80 percent of India’s organised hospitality sector today. It is the fastest growing segment in the sector with around 40 per cent year-on-year growth rate and incidentally within this segment, Lords Hotels & Resorts is the fastest growing mid-market hotel chain in India. There is still a lot of room for growth in this segment and the outlook is positive,” disclosed P R Bansal, Chief Operating Officer, Lords Hotels & Resorts.