The domestic hospitality sector is currently undergoing a significant transformation, marked by several hotel groups making investments in new properties both within India and internationally. In addition, various real estate players are breaking into this industry by forging management contracts with established hotel chains, adding another layer to this evolving landscape.
This expansion within the hospitality business is largely driven by the substantial growth that India is poised to experience in the coming years. At present, the travel and tourism sector in India is estimated to contribute 6.1% of the gross domestic product (GDP), a figure that falls below the global average of 9.9%.
The supply of star-rated accommodations in India lags behind demand significantly, as cities begin transitioning from single-business districts to multiple-business districts, reflecting broader growth as cities expand. Additionally, new growth centers are surfacing in previously undiscovered markets, including Orissa, Chhattisgarh, Jharkhand, Pune, and West Bengal, which has broadened the market for star-rated hotel accommodations across the country.
The hospitality industry can be segmented into four categories: luxury, leisure, business, and budget hotels. Notable hotel chains such as Indian Hotels Company (IHCL), Hotel Leela, and ITC Hotels are strategically positioning themselves to establish a presence in nearly all of these segments.
For example, market leader IHCL is embracing an integrated strategy to deliver accommodations across various price points, targeting nearly all million-plus cities within the country. This endeavor is accompanied by the establishment of hotels in strategic locations worldwide. The company has set its sights on doubling its room inventory to over 20,000 within the next 3-5 years, with around 3,000 of those rooms planned under its budget brand, ‘Ginger.’
Meanwhile, ITC Hotels is employing a blend of owned investment and a franchise model to pursue market leadership. Currently, the company boasts a portfolio of over 90 hotels spread across 77 destinations in India, represented through four distinct brands — ITC Hotels, Welcome Group, Fortune, and Welcome Heritage. Moreover, it operates four properties under the Sheraton franchise, contributing to a room inventory exceeding 6,000, with a significant portion located at the premium end.
Hotel Leela is in the process of constructing new hotels in locations like Udaipur, Chennai, and Delhi while simultaneously expanding its existing properties in Bangalore and Kovalam. Similarly, East India Hotels (EIH) has plans for one new hotel each in Mumbai, Gurgaon, Bangalore, Hyderabad, and Khajuraho. Beyond that, EIH is also enhancing its flight kitchen operations in Kolkata and Mauritius and intends to refurbish its existing properties.