Indian Hotel Industry – A Post-Pandemic Snapshot

An extract from the article ‘Indian Hotel Industry – a Post-Pandemic Snapshot’ by Mandeep Lamba, President (South Asia) HVS ANAROCK.

Over 26,340 rooms were added in the organized or branded hotels segment during 2017-19, at a CAGR of 3%. As of May 2020, supply was forecast to increase at an average of 2.8% (adding approximately 44,000 rooms) during the 2020-2024 period.

Supply growth will slow markedly vis-à-vis pre-COVID-19 expectations:

Under-construction projects face delays on account of labour shortages and issues pertaining to vendors and a disrupted supply chain.
Muted market conditions will likely lead to delayed openings; some projects will remain on hold pending recovery.
Financing challenges on account of negative sentiment for the sector may also delay projects.
Changes in market conditions may render some proposed projects infeasible, leading to indefinite postponements.
Some properties may close on account of financial stress and not reopen for an extended period of time, resulting in negative supply growth.

Prior to COVID-19, over 11,500 rooms were expected to be added to the supply in both 2020 and 2021. Now, we can expect only 15-20% of the anticipated 2020 supply to come into the market, with the rest being postponed to 2021 and beyond. Some properties are likely to be repurposed to other asset classes such as hospitals, student housing and co-living.

5 Future Trends to Watch For:

Increased focus on ancillary revenues. The current crisis has forced the hospitality sector to come up with innovative ways to utilize their assets to stay afloat, thereby opening newer revenue streams. From food delivery, laundry, housekeeping, and facility management to warehousing and more, hotels will be reimagining ‘hospitality’ by extending their services to customers in the comfort of their offices and homes.
Mixed-use developments will become the most sustainable model for hotels going forward as they leverage the best of each asset class while hedging the risks for investors and enhancing the overall guest experience. Such projects provide better returns to investors by maximizing land use efficiency, utilizing FSI optimally and lowering capital costs, thus, improving the viability of the hotel project.
Branded supply will increase. Most hotel brands are implementing standardized hygiene and overall safety protocols across properties to win over future travelers. As a result, independent and boutique hotels are likely to join brands to leverage their guest confidence and trust in the COVID-19 era.
Repurposing as coworking and boutique office spaces. Hotels already have all the required facilities and infrastructure that professionals need to conduct their businesses. They can, therefore, repurpose certain areas for boutique corporate offices. They can also lease out to or partner with coworking operators to develop special packages for professionals looking for ‘office’ spaces near their homes. Certain sections in a hotel can also be repurposed to allow occupation by high-net-worth organizations and companies.
Facility management for corporate offices. Hotel companies may seriously consider venturing into end-to-end facility management of boutique and corporate offices, providing the complete gamut of services such as front office management, housekeeping, maintenance, F&B management, and allied services.