Investing in Hotels

India has witnessed a significant growth in footfall of both domestic and international tourists, after the impact of the Covid-19 pandemic

Official sources claim that the number of foreign tourists who arrived in India this year during January-June is 43.80 lakh which is 106 percent higher than the figure (21.24 lakh) for the corresponding period in 2022. According to these sources the domestic tourism grew from 677 million in 2021 to 1,731 million in 2022. This has led to a rapid growth in the hotel industry. The occupancy rate and the average room rent have been increasing rapidly. As per the latest Motilal Oswal (Investment services) report, Indian Hotels (IH) reported the highest ever consolidated revenue/EBITDA in 3QFY23 (up 23% / 40% v/s 3QFY20). All this indicates that now is the time to invest in hotels. Ashok Malkani examines various aspects of why it is advisable to invest in hotel industry and issues that one must take into consideration while investing in the industry.

The Indian hotel market, on the whole, has immense growth opportunities. According to a report by Hotel Association of India, it is poised to contribute $ 1,504 billion to the country's overall growth by 2047 from $ 65 billion in 2022.

A report by market research company, Mordor Intelligence, states that the hospitality Industry in India is estimated to be worth $23.50 billion in 2023, and is expected to reach $ 29.61 billion by 2028, growing at a CAGR of 4.73% during the forecast period (2023-2028).

India's hospitality sector is being driven by the increase in the number of hotel projects. India's hotel industry ended in the current year with occupancy in the 59-61 percent range, up 15-17 percentage points (pp) from the previous year. Driven by a strong recovery in demand, hotel companies accelerated their growth plans. The report states that 166 new hotels with 14,885 rooms were signed during the year, while 90 hotels with 5,702 rooms were rebranded.