Rising Demand and Renewed Enthusiasm: The Resurgence of India’s Hospitality Sector

Excitement is in the air within the hospitality sector due to an unprecedented surge in demand. Since the festive season in 2022, tourism has experienced a strong rebound, fueled by both domestic and international travel. The pent-up demand, coupled with a newfound enthusiasm in the economy and a revival of consumer demand, has further contributed to this surge.

Numerous reports confirm the authenticity of this upswing and highlight the changing landscape of the hospitality ecosystem. The industry is actively responding to emerging challenges, such as adopting technology and meeting the expectations of tech-empowered customers seeking exceptional service experiences. Confidence in the future is evident through visible actions taken to make the concept of “atmanirbhar” (self-reliance) a reality.

In FY23, the hospitality industry witnessed a robust performance with improved Revenue Per Available Room (RevPAR) and an increase in the Average Room Rate (ARR). According to a report by Morilal Orwal, the occupancy rate (OR) in Q3FY23 stood at 65 percent, just slightly below pre-COVID-19 levels. Industry assessments suggest that the OR will surpass pre-pandemic levels in the upcoming quarters, driven by significant factors like the wedding season, G20 Summit meetings, the ICC ODI Cricket World Cup, and the revival of foreign inbound travel. All segments of tourism, including MICE, inbound traffic, medical tourism, and business and leisure travel, are on the rise. Care Edge estimates a 3-5 percent growth in RevPAR over FY23 levels.

Numerous other reports and surveys support the upward trend in demand. MakeMyTrip reports an increase in the average number of room nights per booking for domestic and outbound holiday packages during the current April-June quarter. Estimates from travel agents and tour operators suggest a 30 percent rise in summer vacation bookings for domestic and international travel. The “Revival of Business Travel: An India Perspective” survey commissioned by American Express India and the Centre for Economics and Business Research (CEBR) indicates that a majority of Indian businesses (67 percent) expect an increase in business travel in 2023, with 77 percent of Group proposesouses planning to expand their travel budgets compared to 2022.

These unmistakable signs demonstrate the resurgence of the Indian hospitality sector compared to the challenging times during the pandemic. India ranks as the 10th largest travel and tourism economy globally, according to the World Travel & Tourism Council (WTTC). The Ministry of Tourism aims to make India one of the top five tourism destinations with a trillion-dollar tourism economy. Positive business sentiment aligns with important policy announcements by the government, such as the “Dekho Apna Desh” campaign, initiatives like Swadesh Darshan and e-visas on arrival, and the mission-oriented promotion of tourism through state participation and public-private partnerships, as highlighted in the Union Budget of 2023-24.

The hospitality industry plays a pivotal role in fulfilling the primary reason for travel—providing a good experience. However, the vision of becoming a top tourist destination cannot be realized without expanding quality accommodation options. A survey by HVS Anarock reveals several interesting statistics. Hotel companies have accelerated their growth plans in response to the strong recovery in demand, resulting in a 33 percent year-over-year increase in brand signings. In 2022, 166 new hotels with 14,885 rooms were added to the branded hotel market, while 90 hotels with 5,702 rooms underwent rebranding. The study notes a decline in the average room count as hotel operators enter smaller markets. Domestic operators have signed more properties (accounting for 75 percent of total signings) than international counterparts, with an average key count of 68 in 2022. Tier 3 and Tier 4 cities