Demand growth to outpace supply in the luxury hospitality segment

Demand growth to outpace supply in luxury hospitality segment, existing luxury stock represents 17% of overall Indian branded hotel stock

Rising income levels combined with a strong macroeconomic environment has led to sizeable demand growth for luxury hospitality. A report by hospitality advisory firm HVS ANAROCK states that the luxury hospitality segment is full of opportunities as demand will outpace supply in the segment between FY2024 and 2028. It adds that the existing stock represents only 17 percent (29,000 keys) of the overall Indian branded hotel stock.

Total demand in the luxury hospitality is estimated to grow at a CAGR of 10.6 percent over FY2024-2028, against supply growth at a CAGR of 5.9 percent over the same period.

The Indian luxury hospitality industry remains significantly under-penetrated compared to global cities. India had only 23 luxury keys per million capita as of March 31, 2024, which is much lower than major APAC countries such as Australia (973), Thailand (690), and China (177).

Given this favourable demand-supply dynamic, the luxury hospitality segment has continued to outperform the broader hospitality industry. In FY24, the RevPAR (revenue per available room) for the luxury hospitality segment was Rs 10,122, more than double that of the overall hospitality industry, which stood at Rs 4,739.

High growth potential

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Ashish Mishra

Prinicipal Correspondent|moneycontrol

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Expected rise in disposable incomes, a widening demand-supply gap, evolving consumer preference for premium experiences, improving infrastructure, and limited luxury inventory  are expected to continue driving the ARR (average room rate)  and occupancy for the luxury hospitality segment.

Inreased global spending on luxury hospitality and significant headroom for ARR growth   also favour the segment's  upward trajectory.

Also Read: Bound for IPO, Brookfield-run Leela plans hotels in spiritual, wildlife tourism segments

The luxury ARR in Indian cities such as Bengaluru ($156) and New Delhi ($195) are significantly lower than the luxury ARR in cities such as London ($746), Dubai ($727), Bali ($624), Singapore ($445), Bangkok ($346), and Hong Kong ($345), the report said.

Luxury Hotel Companies in India

The Indian luxury hotel market has several prominent Indian and foreign brands such as Taj, Leela, Oberoi, Hyatt and Marriot.

While Leela is a pure-play luxury brand, other companies play across a host of segments apart from luxury.

Canadian investment firm Brookfield owned Leela Hotels operates a portfolio of 3,382 keys (rooms), while Indian Hotels, which operates Taj, Vivanta and other brands has a portfolio of 24,136 keys. EIH, another prominent player in the luxury space which operates Oberoi and Trident brands has a portfolio of 4,269 keys.

Juniper Hotels, which operates several hotels under the Hyatt brand, has a portfolio of 1,895 keys and Chalet, which runs hotels such as JW Marriot, Westin and Novotel has 3,052 keys in operation.

In September, Leela filed its draft IPO papers, aiming to raise Rs 5,000 crore.  The luxury hotel company plans to add another eight hotels in the coming years with a total of 833 keys.