India Hospitality Industry Review 2016: A Smoother Ride Ahead

  • In this report, has tracked 170 new hotels signed in 2016 amounting to over 16,000 keys, with 54% signed by international operators and 46% by domestic operators.


  • Among the top 11 markets, Mumbai delivered the highest RevPAR in 2016, while Hyderabad city saw the maximum growth over the last year

The Hotel market in India over the past 15 years has gone through a full economic cycle of strong growth followed by a severe downturn. Starting in 2004 till 2008, hotel markets in the country witnessed strong growth in trading performance, propelling large scale development of new hotel rooms in the country, and establishing an overall bullish approach of investors towards the sector.

This quickly turned with the onset of the Global Financial Crises in 2008, immediately followed by concerns emerging from the domestic political and economic climate of the country. Combined with the large hotel room supply increase, the impact on the sector was extremely severe. From 2009 onwards to end of 2014, hotel markets witnessed a decline in both hotel Occupancy and ADR (“Average Daily Rate”), despite demand growing at a rate of 7.8% in the same period.

There have, however, been signs of a recovery from 2015 onwards, with demand growing at a robust pace and supply additions slowing. The industry is now gradually gaining confidence to lift ADRs and focus on driving overall RevPAR growth, with healthy demand levels supporting growth. In 2016, the top eleven markets in India, witnessed an occupancy increase of 3.0% points y-o-y owing to demand growing by 8.5% and supply by 3.4%. While ADRs increased by 2.6%, RevPAR grew by 7.6% y-o-y.

The year 2016 has many credits to its performance. Not only did the top 11 markets show a substantial increase in RevPAR performance along with demand resuming double digit growth, RevPAR and Demand grew at rates faster than the supply for the first time since 2008. This change is a significant departure from the past years where the supply overhang overshadowed improvements in the market and the industry is now well positioned to grow.

The Indian hotel real estate transaction market in 2017 started off with a big bang. After a dismal 2016, the year saw its first deal close out in January – the acquisition of a majority stake in India’s foremost domestic hotel management company, Sarovar Hotels, by The Louvre Hotel Group (part of Jin Jiang International Holdings) – setting the tone for 2017 to set a new record in India’s fledgling hotel transactions’ market.

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