US hospitality chain Hilton is increasing its pace of hotel signings and openings in India with eyes on emerging markets like Ayodhya.
The chain wants to triple its portfolio to 75 hotels in three to four years from 26 currently which are opened and another 20 which are signed and in the pipeline. It plans to open four to six properties in 2024, up from one last year and expand to upcoming popular destinations such as Ayodhya.
"The spread will increase from 15 markets and go up to 25-30 markets (cities). This you will see within 12-24 months," Zubin Saxena, Hilton's India country head, told Moneycontrol. "We envision ourselves to be present in at least 75 markets in the short to medium terms in the next 5 to 10 years. We have great opportunities to penetrate tier II to V cities and they are growing in terms of infrastructure, travel and hospitality demand."
He said new markets are emerging like Ayodhya - where the Ram temple was consecrated on January 22, Haridwar and Rishikesh, which will grow on the back of infrastructure development. Hilton also plans to launch a 140-room hotel in Lucknow in the first quarter of 2025.
Also read: Ayodhya's hospitality sector anticipates historic surge post-Pran Pratishtha ceremony
"Hilton will be brought into each and every state capital in India, along with tier I markets, so we expect around 25-30 hotels. We would then start exploring almost parallelly the secondary and tertiary market opportunities where we would bring brands like Double Tree by Hilton and Hilton Garden Inn. India is a segment where 85 percent of consumption comes from the domestic market, and we want to explore the strength of this market."
The company is also bringing in more Hilton brands to India, expanding the range from the current five such as Double Tree and Garden Inn to seven including luxury brand Waldorf Astoria.
Wedding market
"We are looking for our luxury brands like Waldorf Astoria and Conrad to come in in tier-I markets. We have signed a 246-room Conrad in Jaipur, a city which caters to the wedding market. Weddings will be a big focus area for us," Saxena said.
The wedding segment in India, which touched $75 billion in FY24, is estimated to be growing at 7-8 percent annually. The company said India’s massive wedding market received global attention with the recent pre-wedding celebrations of Radhika Merchant and Anant Ambani, the son of India's richest person.
Also read: Ayodhya’s hotel infrastructure a work in progress as the city awaits more premium properties
According to Saxena, the food and beverage segment accounts for 40-45 percent of hotel revenue, and a significant share of this comes from weddings and the MICE (meetings, incentives, conferences, and exhibitions) segment.
"There is also great emphasis now on weddings in India and this will benefit the Indian hospitality industry. Also, the F&B trends in tier II, III markets are equally strong in India. We would like to capture that demand," Saxena said.
He expects 50 percent of the supply growth to come from underserved hotel markets in the smaller cities and towns of India.
Hospitality growth
The hospitality sector is estimated to expand at a 4 to 5 percent compounded annual growth rate over the next four to five years, with the addition of over 50,000 rooms to the country's current inventory of about 160,000 branded rooms, according to credit rating firm CareEdge Ratings.
Supply has become more balanced across segments compared with the earlier mix that was heavily weighted towards luxury and upper upscale hotels, the credit rating company said in a note.
The concentration of the luxury-upper upscale segment reduced to 32 percent in FY23 from 39 percent in FY15 and is expected to narrow to 26 percent by FY27. The majority of new rooms will come in the upscale, upper midscale and midscale/economy sections.
Due to the demand-supply gap, the pan-India average room rate may rise to Rs 7,700 to Rs 7,900 in FY25 from Rs 7,200 to Rs 7,400 in FY24.
Also read: Ayodhya hotels earn `record’ Rs 20 cr in three days; hoteliers say it Ram ji ki kripa
The hospitality sector's RevPAR (revenue per available room) is estimated to have increased to an average range of Rs 4,800 to Rs 5,000 by the end of FY24, up from about Rs 4,300 in FY23. It is expected to grow by 9-11 percent in FY25, the note added.
Occupancy is likely to be steady in the range of 68-70 percent in FY25, said Ravleen Sethi, associate director at CareEdge Ratings.
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