Industry Outlook 2017 Confused, but Not Concerning!
|Wednesday, January 11, 2017, 13:42 Hrs [IST]|
A year that otherwise would have ended on a
positive note for the hospitality industry in the
country went bit off-track because of the
impromptu government action to demonetise high value
currency notes in early November. Although the ultimate
impact of the government action is yet not ascertained
by any of the industry bodies, the stakeholders of the
industry covertly concede the damage being done to
their prospects at least in the short-term. Travel, tourism,
hospitality, etc., are heavily indulgence-oriented and
therefore succumb quickly than any other business to any
event or action that directly pinches the consumer.
While the organised hospitality industry has somewhat
come to terms with the situation and shifted their post in
terms of demand revival till the second half of 2017, they
strongly believe that the latest move by the government
would benefit them in the long-run as business would
start moving from unorganised to organised sector.
However, investments, both ongoing as well as in the
pipeline, will be impacted due to this sudden move unless
they are backed by clear funding framework. Industry
experts believe that there will be more projects up for
sale, and acquisitions will pick up steam once again.
With hospitality business gaining an organised
form with the advent of aggregators in the budget and
economy space, the industry players are unanimous
in their opinion that it will be technology that will be
playing a major role in customer acquisition going
forward. It is incumbent on the hotels to keep pace with
the latest technology trends and new marketing tools on
the online space.
Despite all the trials and tribulations in the socio-political
and economic spheres in the country, the hospitality
players are not overly concerned but rather hold faith
in the future opportunities in the India market. They rest
their confidence on the rapid urbanisation, improvements
in the physical infrastructure, demographic changes, and
above all the promises of the government of the day.
Hospitality Biz encapsulates the sentiments in the
industry while going into the New Year.
Senior VP, Operations,
Online bookings to grow
With an increment in wealth creation,
urbanisation and globalisation,
some of the major trends impacting
hospitality industry globally aren’t
vastly different from those in India.
The hotel industry in India has evolved continuously of late and
there’s a lot more change to come. In the past year, the rise of
online bookings has increased consumer power enormously and
changed booking habits almost entirely. In the coming year, we
see guests increasingly booking online and the share of mobile
devices in planning and booking trips to increase tremendously.
We welcome the bold move to curb money laundering and
counterfeiting. While guests may face inconvenience in the
short term, this will mark the beginning of digital currency
era. We at AccorHotels have already taken significant steps and
introduced AccorHotels Personal Wallet, a seamless, quick and
safe way to manage payments.
For 2017, we plan to open 10 more new hotels as part of our
network expansion to 55 hotels in India and inching closer
to our target growth of over 80 hotels by 2020. Our growth
momentum will see us reach over 10,000 rooms across India
in 2017. As we move forward, densification remains a major
strategy for growth in India, with the intent to be leaders in the
markets we operate in.
Shantha de Silva,
Head of South West Asia,
InterContinental Hotels Group
The hospitality and tourism industry
in India continues to grow on the
back of an expanding middle class,
infrastructure development, increase
in international tourist arrivals and
the extension of e-Tourist Visa to
150 countries. Currently, domestic travel constitutes bulk of
the demand, and we anticipate this trend to continue. We also
anticipate the MICE industry to grow further.
Organised sector to benefit from demonetisation
The demonetisation drive will benefit the organised hospitality
sector in India as there would be movement of customers to the
organised sector due to ease of alternate modes of payment.
On the investment front, demonetisation would lead to
increased liquidity in banks which is expected to bring down
interest rates, and also a movement towards transparent real
Also the decision to introduce GST as a measure to rationalise
taxes will in addition to reducing tax burden on the sector
provide a level playing field vis-à-vis neighbouring countries.
We continue to expand our India presence through our midscale
brands Holiday Inn and Holiday Inn Express, our upscale brand
Crowne Plaza and our luxury InterContinental brand. We
currently have 28 hotels (5,362 rooms) open in India across
12 cities and a further 41 hotels (7,765 rooms) in the pipeline,
which once open will mean a presence in 11 additional cities and
a growth of over 200% in India.
VP, Asset Management,
SAMHI Hotels Pvt. Ltd.
Changing nature of
Increased institutional ownership of
branded hotels in the country will
continue to grow; as a result, hotel
operative performance will be more
closely linked with its financial performance. We have seen little
or no growth in the Average Daily Rates for many years; this is
now expected to start correcting. At customer front, digital is
going to play greater role making consumers more aware of the
product they choose. The increased use of technology is closely
accompanied by an increased use of mobile devices and apps.
Another rising trend has been the influx of ‘branded’ budget
hotels in the country. Budget branded hotels will allow greater
travel for more Indians without the concern for compromised
hygiene and exorbitant costs.
Demand continues to grow
Demand is going to continue to rise; India is one of the best
placed nations for growth in the entire globe. Government’s
economic reforms, pro-business approach and significant push
to improve infra-structure coupled with young and enterprising
Indian population will surely translate into more room nights
assisting rate improvement. We expect this change to initiate as
early as quarter one of 2017.
At SAMHI, our aim is to continue to build and acquire new
hotels across India. SAMHI enjoys great relationships with its
operating and business partners, they continue to extend their
much needed support and confidence in the SAMHI’s ability to
VP, Development – India, Hilton
We can expect the hospitality
industry to grow in the coming years.
The friendly visa policies such as the
extension of e-Tourist Visa to over
150 countries is further fuelling this
growth. While there is an increase
in foreign travel, the rising middle class domestic consumers are
also creating more opportunity.
Both supply and demand are set to increase in the coming times.
According to the HVS 2016 Report, in 2015/16, both supply and
demand grew by 9.9% YoY and 16.4% YoY respectively nationwide.
Thus, the hotel industry in India can expect sustained growth in
the coming years due to various infrastructural reforms.
Demonetisation to impact positivelyk
Demonetisation issue will have varied effects on the many
sections, but overall it will impact the growth positively. While
the drive will affect the unorganised sector in the short term, it
will generally benefit the organised hospitality sector.
As far as new projects are concerned, with banks dealing with
increased liquidity as a result of cash deposits in recent weeks,
there may be a move to increase lending and reduce interest rates
in the future.
Hilton currently operates 15 hotels and resorts with over 2,400
rooms under five brands. This includes the recent entry of our
luxury Conrad Hotels & Resorts brand in India with the opening
of Conrad Pune.
Our pipeline of 16 hotels with 2,699 rooms shows our
commitment. This pipeline includes Conrad Bengaluru.
Wyndham Hotel Group
Growth momentum to
Technology has had a huge impact
on every industry across the world.
With consumers connecting with
a brand via multiple touch points
such as a website, OTA sites, social media, mobile, etc., keeping
up with the latest technology trends and new marketing tools
has become critical for the hoteliers.
We believe that the MICE segment will grow further in 2017 as
most new hotels are coming up with meeting and banquet spaces
to attract MICE business.
Projects to impact negatively
Demonetisation might lead to some cancellations or postponements
in the short or medium term due to lack of available currency. The
projects that are already in the pipeline might face some adverse
effect and delays on account of demonetisation.
Budget segment to drive growth
We estimate shortfall of around one lac rooms across the Indian
market in the next three-five years. The shortage seems to be
more in the budget and the mid-market segment.
With our announcement on Wyndham Hotel Group’s recent
brand transformation, we gear up to claim our spot as the largest
and the best in the world. With the successful launch of brands
such as Ramada Plaza, Ramada Encore, Howard Johnson and
Days Inn over the last six years, we are ready to further expand
our footprint in India.
CMD, Concept Hospitality
Economy to shrink
Indian economy might shrink for
a few quarters in 2017, but will
bounce back before the year ends.
Leisure business will be affected for
a few quarters and expected to get
back by Diwali next year. The inflow
from one of the leading markets, the UK, may be affected because
of the uncertainty of BREXIT and leisure hotels/resorts will have
to depend on domestic travellers.
Impact on projects
Impact on hotel projects post- demonetisation will depend on
bankability of such projects. If the developer’s balance sheet
is already stretched and he is not able to tap bank finances
to complete the projects, then the project might face some
hardships and commercial commencement date might be
delayed. If we have owners whose projects have negligible loan
outstanding on their hotel assets, the same can be mortgaged
to raise funding.
Since launch of Fern brand in 2009, our company has established
its operations in India and abroad with 40 successful hotels under
management and 20 hotels at various stages of development. The
Fern brand is poised for exponential growth and has added 16
properties since January 2016 to our network. Our focus remains
to consolidate our presence in geographies where we are already
present with multiple properties and grow our presence in other
geographies including central, Southern and Eastern coast of
CMD, Royal Orchid Hotels Ltd.
Leisure travel to slow down
Some of the key drivers for the hotel
industry which I believe will play a
significant role are:
The travel sector for business hotels are largely driven from
corporate sectors which are coordinated by the travel companies,
GDS and contracted relationships in the beginning of every fiscal
year. These factors are drawn out well in advance and play a very
small role in the cash transaction space. However, leisure travel
and FITs may tend to moderate in the wake of demonetisation.
We have also seen that the banquet business has subsidised
temporarily but will reverse shortly.
- Revenue management in the
rooms and restaurant space
- Themed locations for MICE
Presence of the brand in the mobile space through apps and
- Focus on tertiary markets with eco-tourism and adventure
temporarily but will reverse shortly.
However, because of drop in new supplies, we expect a positive
inclination in the demand space.
Our focus is to build through alliances and partnerships
to diverse the hospitality portfolio into new sectors like ecotourism,
affordable luxury and budget friendly inns keeping pace
to the behaviour of the new millennial travellers who are seeking
customised itineraries and prince sensitive in their travels. The
Royal Orchid Hotels and Regenta Hotels have been making
tremendous strides in expansions with the launch of eight hotels
in this year alone.
Dy. MD, Lemon Tree Hotel
Demand to grow steadily
We should see the cycle turning
positive from H2 of the coming
year, hopefully, with some buoyancy
in pricing as well.
Domestic demand has slipped a
bit because of government‘s demonetisation drive, but I hope
the market to recover from January onwards. Hardening of
occupancies is expected in the New Year as new supply of rooms
going to be marginal.
As far as impact on the new investments are concerned, my
personal observation is that if properties come up for sale in the
aftermath of the demonetisation exercise, interest of genuine
and serious investors will be renewed in the sector.
Moreover, Goods & Services Tax (GST) is expected to bring
a positive change, in terms of clarity and parity which will be
beneficial for the industry in the long-run.
In the meantime, Lemon Tree Hotels will continue to grow
our owned and managed portfolio aggressively in the New
VP-Development & Asset
Management, InterGlobe Hotels
Govt policies to usher transparency
We at IGH are viewing 2017 with a
great deal of optimism. We expect to
raise ARRs and stabilise occupancies
further. At this point we have 13
operational Ibis properties in India,
with another two in Kochi and Coimbatore set to launch over
the next 1-3 months.
Over the years, travel and tourism industry has emerged as a
significant source of foreign exchange and a large employment
generator. In the past one year, there have been a few positive
and potentially long-lasting changes in the Indian real estate.
The passing of RERA (Real Estate Regulation and Development
Act 2016), the Benami Transactions Act and now the
demonetisation move will ensure that going forward; the sector
will become more transparent.
Demand for hotels especially in the branded space is unlikely
to be impacted much by the demonetisation move. Purely from
a transactions standpoint, no more 2-3% of transactions at
our properties are in cash, and therefore, we estimate minimal
impact on performance on account of this move. However, we
do anticipate a reduction in leisure travel (discretionary spend)
and social space.
IGH has always been very transparent about funding our
projects and therefore, we anticipate very little to change for all
our on-going ventures.
VP, Sales Operations - South
Asia, Hyatt Hotels Corporation
New market opportunities
We have a reasonably optimistic
and positive perspective on the
hospitality industry in India for
2017. We believe that the country
has strong market and economic
fundamentals supporting the growth of the industry in the
Tier II and III markets are fast emerging as next destinations
for corporate, leisure and experience-seeking travellers. These
markets have typically remained under-served. The increased
penetration of internet and smart phones across the country
has contributed to the rise in online bookings.
Our business transactions are majorly cashless and thus we do
not see demonetisation effecting domestic demand, our projects
in progress and pipeline, and any investment decisions.
Vision to be the preferred hotel brand
We don’t want to be the biggest, but want to be the most
preferred hospitality brand in India. We leverage the
advantages that come from being smaller than the big guys
and bigger than the boutiques. We currently have more than
6000 operational rooms in the country in 24 properties across
15 key Indian cities. Opening of Andaz Delhi in Aerocity will
also mark the launch of our sixth brand - Andaz in India.
Our select service model – Hyatt Place is a large part of our
growth strategy in India. In addition to a number of Hyatt
Place hotels in places like Rameswaram and Hyderabad (148
Rooms), we also look forward to the opening of Grand Hyatt
Kochi in 2017.
CEO, Choice Hotels India
Technology to drive
Technology will be one of the top
trends in the coming year. We will
continue to see the evolution of
hospitality software and consumerfacing
technology to enhance service
that will influence purchase behaviour. This will also hold true
in improving the service quality like use of virtual concierge;
keeping record of guest's preferences.
No impact due to demonetisation
We expect a very nominal effect on domestic demand as most of
the transactions are already either via cards or cheques. While
a mild setback could be seen in the case of leisure tourism, this
trend will be corrected over a period of time. The immediate
impact would possibly be seen in the food & beverage areas of
With regard to room rates, I don’t see them going northward for
the next year or so. If at all, there would be a very small increase
in the room rates, given the current supply in the market.
Focus on Tier II & III cities
As a group, Choice Hotels is looking at Tier II and III cities for our
growth. We are one of the fastest and finest growing hotel chains
with over 25 properties in as many destinations in India. There are
another 10 properties under different stages of development.
MD, Pride Hotels
A promising year ahead
In 2017, we expect both domestic
and inbound tourism to grow. The
target of government is also to
double the tourist arrival in next
five years which will also give good
growth potential to hospitality
industry. Government is also improving infrastructure which
will be a great support for hospitality sector.
The effect of demonetisation will be initially for some time on
the domestic demand but I don’t think it will remain for long
time. The investment decision will definitely affect. At present
there are very few new projects happening in hospitality sector
and investor will hold back decision for some time.
The implementation of GST will be very helpful for industry
as multiple compliances will reduce and it will be good to
introduce to our guest one single tax rate so they will be
Going asset light
Our marketing strategy is well defined now as we have launched
in 2016 our new brand Pride Plaza Hotel in Aerocity, New
Delhi. The Pride Group is now more active in our management
side and to add more rooms in our asset light model. We have
already signed new hotels under management at Indore and
Bengaluru. We are also doing renovation and up-gradation of
Ahmedabad and Chennai Hotels.
MD & CEO, Ginger Hotels
Four key trends to
dominate the industry in
Leisure segment to take a hit
- Start of the up-cycle: 2017
signals the start of a potential 4-year
up-cycle for the industry. Demand
growth strengthening to 16% and
supply addition plateauing to sub 10% mirror this theme.
The focus on ‘Make in India’, buttressed by healthy CAPEX
commitments augurs well for demand sustainability.
- Consolidation: Scale will become critical for market share and
margins. The industry would see accelerated consolidation
and collaboration to be able to deliver shareholder value.
- Focus on B2C: India is a huge potential B2C market. Brands
will accelerate resources and bandwidth allocation to direct
a large chunk of their topline direct from consumers.
Smarter brands would in parallel focus on improving their
reach, especially through mobile, to millennials and drive
sales fulfillment through loyalty and proprietary channels.
- Leisure growth: Leisure would clock double digit RevPAR
growth and contribute enhanced margins. As India rapidly
urbanises and a million people are released into the
workforce every month, the urban nomads will take more
frequent breaks. This will make leisure increasingly season
Demonetisation will sedate leisure demand from Tier II and III
towns in Q1 before resuming on an even keel Q3 onwards. The
shift to e-wallets would shift demand from the unstructured
market to the branded market. This impact would be more
pronounced for banquet and F&B earnings which would benefit
from this share shift.
MD - South Asia,
Golden Tulip Hotels
Experiential travel to
Trend of experiential travel is
expected to pick up strong momentum
where guests want to experience the
hotel and the destination a lot more
than ever before. It is no longer about a good room with clean
beds; however it's about the new experiences of life which could
be out of my comfort zone when I travel.
With the ease of visas and governments focus to promote
inbound tourism, I see that this segment should gain momentum
specially in mid market hotels.
In the demand-supply front, the demand is now matching the
capacity build up and is likely to be fully absorbed by 2017. In my
view this should help hotels gain enhanced average rates.
Business as usual
The segments that are likely to be affected by demonetisation
temporarily are weddings and domestic family group travel.
However, the impact will be temporary for three-six months and
will stabilise once the country accepts the new normal.
GST could be game changer for the industry however it depends
on the rate of taxes brought in. A rational level of tax makes good
business sense for every industry.
Executive Director, Sarovar
Hotels & Resorts
Domestic Travel will
continue to be bedrock
Domestic travellers will continue
to be the bedrock of demand.
MICE business collaborated with
short–stay business travel to drive
demand for rooms. F&B offerings to play a crucial role in
leisure destinations as consumers travel more and gain more
We expect steady increase in demand. Recent additions of
supply will even out and the room rates should now strengthen.
Larger number of bookings will take place online. Technology
will be a key element in booking hotel rooms with increasing
usage of smartphones during travel.
Market to bounce back
There has been a marginal impact on domestic level in the
wake of demonetisation. It should be back to level in one to
two months. We do expect to see delay in certain projects and
possibly change of ownerships. It is definitely going to affect
Domestic & international expansion
We expect 2017 to be another exciting year. We are expanding
to newer destinations including Raipur, Jaisalmer, New Delhi
– Kapashera and Amritsar. We will also be opening The Lazizi
Premeire, Nairobi in February and we have recently signed
hotels in Lusaka, Zambia and Addis Ababa, Ethiopia.
VP, Lords Hotels & Resorts
OTAs continue to drive
From a consumer point of view,
we believe the Online Travel
Aggregators (OTAs) are going to
be the major drivers for the hotel
industry. In the last couple of years,
the OTAs have played a big role in attracting domestic travellers
towards taking holidays. The huge discounts and travel – stay
combo offers have delighted the customers and the hotel
industry has witnessed a surge in booking.
We witnessed a slight stagnation in bookings as a consequence
of the demonetisation. At the same time due to the many
weddings in this season, the blow may have been cushioned as
people have not cancelled on the venues and rooms that were
booked for this purpose. It is the food & beverage business that
has been impacted as most of our local customers have refrained
from eating out.
Consolidation is the mantra
We are presently focusing on consolidation and further
improving our existing operations. We intend to optimise the
ARRs across all four brands including Lords Plaza, Lords Inn,
Lords Eco Inn and Lords Resorts. We are strategically marketing
the brand at international venues and familiarising audiences
with our offerings.
Chairman, HVS-Asia Pacific
We expect occupancies to continue
to improve and hence the
performance. What most owners
are actually hoping for is a real push
towards average rate increases. I
think a trend that will come into
effect is the removal of free bees
offered by various brands. Already Taj and Oberoi’s for now
have started removing free breakfasts as part of room rates.
Projects to be impacted
From a consumer demand perspective, demonetisation would
impact for a short period only. On the other hand I think it
would actually help level the playing field and banquet revenues
should actually see a rise as the cash economy will reduce and
private farm houses and banquet houses which used to thrive
on the same may no longer have the advantage. However the
real effects of this will become clear only once GST rates are
As far as projects in progress and in the pipeline, HVS estimate
that at least 1/3rd of the supply that was under development
or which was about to commence will now be stopped due to
demonetisation. Hotel development was a good avenue for
politicians with black money to build hotels and convert them
to white. What demonetisation has done again is to clean up
MD – Hotels, JLL India
The industry is at the start of a
recovery after a long period of pain
and we should be witnessing a
strong upcycle spread over the next
few years. With supply considerably
reducing, hotel ADR’s should see a
consistent increase and most of the
upside should flow through to enhance the GOP’s of operating
Acquisitions to gain steam
On the investment side we are likely to see investments largely into
acquisition of operating or brownfield hotels as against greenfield
projects. Most investors are weary of the development risks and
now focused on investing in operating hotels or platforms. We
should see an active hotels transactions marketplace in the coming
years starting 2017. On newer developments, the trend will be
increasingly towards mixed used projects and stand-alone hotels
will find less favour with developers. Technology will continue to
be a key differentiator for operating hotels as also in the design for
Investors to wait & watch
There will be some slowdown on account of a certain level of
uncertainty that has crept into the economy on account of the
impact of demonetisation and investors will be keen to better
understand the situation before being fully committed. In the
short term, new developments will see a slow down till there is
more clarity on the demonetisation of the economy and the
repercussions of the demonetisation exercise.