2022 was a year of recovery for the Indian hospitality industry, following the difficulties of the previous two years. Despite the challenges, the industry managed to show positive signs, particularly in terms of demand for domestic leisure destinations and the growth of Tier II, III, and IV cities.
One significant factor that has contributed to this growth is the strong infrastructure development work taking place across the country, particularly in relation to airports, roads, and railways. This development has generated fresh demand, with Goa’s second airport development being a prime example.
The newly built Mopa Airport will substantially improve air connectivity with new domestic and international destinations, generating additional demand for 70,000 room nights annually. In FY 23-24, hotels in Goa are expected to witness a rise in average daily rate and occupancy by 10 to 12 per cent due to enhanced air connectivity.
Another example of hospitality investment correlated with infrastructure development is the commencement of construction work for the Mumbai-Ahmedabad bullet train corridor. Domestic and foreign investors have already shown interest in acquiring hotels around bullet train station terminals in cities such as Surat, Vadodara, and Ahmedabad.
The domestic leisure market also played a crucial role in fueling demand in the industry, with offbeat locations, home/villa stays, farm stays, staycations, and coastal destinations reporting high demand. This market was largely driven by young domestic travelers, who preferred to plan travel closer to the date and opted for domestic travel to avoid uncertainty.
Based on data collected by the NOESIS research team, the reasons for strong demand for villas/homestays at rural and offbeat destinations were value for money, privacy, and more. Villa owners in such locations have made an average return on investment (ROI) of 6 to 10 per cent on the Capex incurred by them on today’s valuation, with some cases seeing an ROI as high as 14 per cent.
Due to limited regulatory approvals and low Capex requirements in comparison to traditional resort/hotel developments, there is strong potential for supply to add up in offbeat locations. Land cost is quite low in these areas, making such projects quite profitable for investors.
Looking ahead, we foresee 2023 as being a golden year for the hospitality and lodging formats at the macro level, with records expected to be broken in terms of ADRs, occupancy, revenues, profitability, new project announcements, and fundraising. With the G20 summit in India encompassing 200 events across 50 cities, there is further potential for the industry to showcase itself on a global platform.
In conclusion, 2022 was a year of recovery for the Indian hospitality industry, with strong infrastructure development, domestic leisure travel, and offbeat locations driving growth. As we move into 2023, there is great potential for the industry to continue on this upward trajectory and achieve record-breaking success.