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It's time to check in to India!

Last updated on: May 02, 2017 12:20 IST

India needs 1.4 million hotel beds a night but has only 2.4 lakh, points out Rahul Pandit, MD and CEO of Ginger Hotels.

IMAGE: CLICK on each of the rooms in the image to get the statistics on India's acute hotel room shortage. Graphic by: Rajesh Karkera/Rediff.com and Ashish Narsale/Rediff.com

This year -- 2017 -- heralds the start of a potential, extended four-year up-cycle for hospitality in India.
 
The last five years have seen the sector deliver a muted performance. Due both to the economic downturn and the largest release of new supply since independence.
 
The tide is turning.

Receptionists attend to guests at the Crown Plaza hotel, run by the InterContinental Hotels Group, New Delhi, January 31, 2014. Photo: Anindito Mukherjee/Reuters

IMAGE: Room demand in Indian hotels has picked up pace, growing over 16 per cent last year, and is forecast to maintain the momentum.
Image shows receptionists attending to guests at the Crown Plaza hotel, run by the InterContinental Hotels Group, New Delhi. Photograph: Anindito Mukherjee/Reuters.

India is today the fastest growing major economy in the world. Supply that grew in double digits has petered down to sub-10 per cent and is expected to maintain a single-digit trot over the next four to five years. Aggregate room demand has picked up pace, growing over 16 per cent last year and is forecast to maintain momentum.
 
This buoyancy is also reflected in the adjacent airline sector, growing over 21 per cent in passenger traffic last year to 131 million -- making India the fourth largest aviation market and the fastest growing domestic market globally.

Aerocity, Near T3, Indira Gandhi International Airport, Delhi

IMAGE: Delhi's Aerocity, located near T3, Indira Gandhi International Airport, has added tremendously to country's bed capacity, offering accommodation in some 16 brand new luxury hotels and has footfalls of approximately 10,000 per day.

It is also mirrored in the order books of Indigo and SpiceJet airlines getting ready to add over 400 and 200 new aircraft each respectively. Boeing estimates India would need 1,800 new aircraft over the next decade.

This demand upsurge is already leading to congestion at existing airports. The government has identified a plan to revive 160 airports and airstrips. The Udan scheme, that seeks to connect 43 unserved and underserved locations, is a welcome step for regional connectivity.
 
Paharganj district, a popular tourist area packed with backpacker hotels and restaurants near New Delhi railway station, January 16, 2014. Photo: Vijay Mathur//Reuters

IMAGE: The 75,000 international visitors that arrive daily in India need a place each day to stay. Paharganj district, New Delhi, is a popular tourist area packed with backpacker hotels near the main railway station. Photograph: Vijay Mathur/Reuters.

A quick comparison with China highlights the scale of opportunity. China has 307 hotel rooms per 100,000 people, India has only 18.

Delhi and Mumbai, India's top cities each have 20,000 and 15,000 branded hotel rooms. Shanghai and Beijing have 130,000 and 110,000, totalling more than the total branded supply in India.
 
Matteo Boglione, executive chef of Le Cirque Signature restaurant, prepares a dish in the kitchens of The Leela Mumbai December 7, 2013. Photo: Danish Siddiqui//Reuters

IMAGE: Delhi and Mumbai, India's top cities each have 20,000 and 15,000 branded hotel rooms.
Image shows Matteo Boglione, executive chef of Le Cirque Signature restaurant, prepares a dish in the kitchens of one of the city's prominent hotels, The Leela Mumbai. Photograph: Danish Siddiqui/Reuters.

As many as 270,000 people travel by air daily in India. Assuming half of them do return journeys, 135,000 need a place to stay each night. Additionally, 75,000 international visitors need a place each day. This adds up to a requirement of 210,000 beds each night.
 
Air and international visitors, however, are only the tip of the iceberg.

A Srinagar hotel in a state where tourist arrivals is down from 11 lakh in 2013 to a pitiful 4 lakhs in 2016, with 2017 looking perhaps worse. Photo: Adnan Abidi/Reuters

IMAGE: A million people join India's workforce each month. The youth add to the domestic travel market of over 1.3 billion visitations a year, touring all over India, even Kashmir.
Image shows a hotel in Srinagar. Photograph: Adnan Abidi/Reuters.

1.3 million people travel daily on Indian Railways. Bisecting the demand for return journeys, 650,000 need a place to stay each night. Using railways as a proxy, surface transport demand (cars and buses) is estimated to be over 600,000 people daily.
 
Thus, the aggregate lodging requirement for India adds up to over 1.4 million beds each night.
 
Members of a wedding band in front of the ITC Maurya, New Delhi, where both US President Barack Obama and Presdient Bill Clinton, stayed among many other heads of state, January 24, 2015. Photo: Anindito Mukherjee/Reuters

IMAGE: Currently three-fourths of the branded supply of beds is held in the luxury and upscale segment, like this one in New Delhi.
Image shows members of a wedding band in front of the ITC Maurya, New Delhi, where both US Presidents Barack Obama and Bill Clinton, stayed, among many other heads of state. Photograph: Anindito Mukherjee/Reuters.

So, the conundrum is -- if the tracked supply in the branded lodging market is under 240,000 rooms, where are these people staying?
 
Friends and family for one -- that is why Indians lean on their relatives so much! A large part of this demand is consummated in the unstructured, non-branded market.
 
Deep Kalra of Make My Trip already lists over 750,000 rooms, but says they have yet not fully covered the market.
 
The country’s evolving demographics also support this growth.
 
An employee prepares a room at the Four Points hotel, Ahmedabad, April 9, 2013. Photo: Amit Dave/Reuters

IMAGE: India's domestic travel market -- 1.3 billion visitations a year -- is today fast becoming the mainstay of the travel and tourism business.
Image shows an employee prepares a room at the Four Points hotel, Ahmedabad. Photograph: Amit Dave/Reuters.

With the average age at 28 years, India is today the most youthful major economy in the world. The fact that it lagged this curve over the last few decades now presents it an opportunity -- and challenge -- to catch up to the per capita potential of mature economies over the next few decades. While Europe and China grow older and North America sees incremental addition to its working age population, India will become the dominant workforce powerhouse of the world.
 
A million people are getting released into the workforce in India each month, and this pace will continue over the next decade as well. The youth are more productive, increasing the country’s disposable income and contributing spends back into the economy. They also add to the domestic travel market of over 1.3 billion visitations a year, which is today fast becoming the mainstay of the travel and tourism business in India.
 
A software engineer and his family at a restaurant at Tata Group's Ginger hotel, New Delhi, May 23, 2012. Photo: Parivartan Sharma/Reuters.

IMAGE: Leisure breaks are now fast becoming a lifestyle requirement for interpersonal communication and acquiring experiential memories among India's young workforce.
Image shows a family at a restaurant in Tata Group's Ginger hotel, New Delhi. Photograph: Parivartan Sharma/Reuters.

This demographic movement has caused another significant shift over the last decade. India added over 90 million people (more than the population of Germany) to its urban cities between 2005 and 2015. Fifty-three cities today have a million-plus people each. More than 470 million will reside in Indian cities by 2020. These urban nuclei are the natural markets for service and commerce.
 
Such urban clusters have had an unforeseen impact on leisure travel. The youth are taking leisure breaks to connect to their partners and families, unable to do so in the congestion and pace of modern cities. They are also visiting pilgrimage destinations to keep connected to their beliefs, away from their native moorings. Leisure breaks are now fast becoming a lifestyle requirement for interpersonal communication and acquiring experiential memories.
 
Thus, leisure travel -- which used to be niche and seasonal -- has now become mainstream, more impervious to occupancy and rate concerns than business travel. With the rapid improvement in the road network and car ownership, surface transport too is adding its might. Earlier road trips were preferred within three-four hours of driving distance, it has now doubled to six-eight hours -- thus increasing both the range and frequency of such travel.
 
Guests hold marigold garlands to receive their relatives outside the Holiday Inn, run by the InterContinental Hotels Group, New Delhi. Photo: Anindito Mukherjee/Reuters

IMAGE: The aggregate lodging requirement for India adds up to over 1.4 million beds each night.
Image shows guests at Holiday Inn, New Delhi, waiting to receive their relatives. Anindito Mukherjee/Reuters.

Currently three-fourths of the branded supply is held in the luxury and upscale segment. Budget and mid-scale, akin to the global stack, represent the major growth opportunities for lodging in India.
 
India’s democracy, led by PM Modi’s T pentagon -- Talent, Tradition, Tourism, Trade and Technology -- of development and a GDP forecast of seven per cent + over the next decade, augurs well for capital looking at an appreciation arbitrage. This is the time to check in to India.
 
The writer is MD & CEO, Ginger Hotels, and member, National Committee on Tourism, Confederation of Indian Industry.

Rahul Pandit
Source: