Analysis of the hotel market in India
The relevance of research
A modern hotel enterprise provides consumers with not only accommodation and meals, but also a wide range of communication, entertainment, excursion services, medical, health, sports services, etc. In fact, hotel enterprises in the structure of the tourism and hospitality industry perform key functions, as they offer consumers an expanded a hotel product, in the formation and promotion of which all sectors and elements of the tourism and hospitality sector take part
Purpose of the study
Analysis of the state of the hotel market, assessment of the market size, analysis of competitors, as well as identification of factors affecting the hotel market
Content
Part 1. Overview of the Indian hotel market
1.1. Definition and Characteristics of the Indian Hotel Market
1.2. Dynamics of the volume of the Indian hotel market, 2017-2021
1.3. Market structure by type of service provided in India
1.4. Structure of the hotel market by Union Territories
1.5. Assessment of current trends and development prospects of the studied market
1.6. Assessment of factors affecting the market
1.7. Analysis of sectoral indicators of financial and economic activity
Part 2. Competitive analysis in the hotel market in India
2.1. Major players in the market
2.2. Market shares of the largest competitors
2.3. Profiles of major players
Part 3. Analysis of hotel consumption
3.1. Estimation of hotel consumption per capita
3.2. Market Saturation and Estimated Market Potential in India
3.3. Description of consumer preferences
3.4. Price analysis
Part 4. Assessment of factors of investment attractiveness of the market
Part 5. Forecast for the development of the hotel market until 2026
Part 6. Conclusions on the prospects of creating enterprises in the study area and recommendations for current market operators
Research excerpt
Part 1. Overview of the Indian hotel market
1.1. Definition and Characteristics of the Indian Hotel Market
Hotel, hotel (from French hôtel) - a means of accommodation, consisting of a certain number of rooms, having a single management, providing a set of services (at least - making beds, cleaning the room and bathroom).
A modern hotel enterprise provides consumers with not only accommodation and meals, but also a wide range of communication services, entertainment, excursion services, medical, health, sports services, etc.
In fact, hotel enterprises in the structure of the tourism and hospitality industry perform key functions, as they offer consumers an expanded hotel product, in the formation and promotion of which all sectors and elements of the tourism and hospitality sector take part.
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A hotel chain/network (eng. hotel chains) is a certain number of hotels that use the same name and brand name, have certain common consumer features and conduct joint marketing activities. An enterprise managing a hotel chain can be its owner or co-owner, manage it or supervise its activities on the basis of the agreements used (including the opening of franchise hotels).
In addition to the traditional types of hotels, they are divided into: motels, hostels, mini-hotels, specialized hotels, etc.
Motel (English motel, from motor hotel) - a hotel (usually small; located near highways), focused on guests traveling in their own vehicles, the entrance to the rooms of which is carried out from the street (from the parking place of the car). As a rule, motels have only one or two floors, the number of additional services and room types is minimal, which corresponds to the low cost of living. For many people, especially those who are constantly on the road in their cars, motels are convenient because of the absence of lengthy registration formalities, the ability to have their car in sight; direct access from the street to the room is also an advantage for the disabled. The disadvantages of motels include their low level of security, as well as minimal maintenance.
Mini-hotel. This term, as well as hotels of this type, is very common in. The ease of emergence of mini-hotels is due to the presence in the past of a large number of communal apartments in the city center. Such apartments had a total area from 120 to 600 m² (the most common format is from 200 to 300 meters). Such dimensions allow you to create about 6-10 rooms with all amenities; with a small kitchen-cafe and reception. In such hotels there are service personnel working 24 hours (administrator + maid).
The main disadvantages are: the size of the rooms (sometimes there are very small ones - up to 10 m²), as well as the adjacent territory (sometimes not repaired entrances, sloppy courtyard, lack of an elevator).
A hostel is a hotel that provides travelers with short-term accommodation - as a rule, a bed in a dormitory room without additional amenities (often for young people and students, station hotels for travelers). Several strangers live in such rooms at the same time, which brings hostels closer to hostels. Hostels are in demand by lovers of inexpensive travel, so they focus mainly on financially constrained youth. The disadvantages of hostels include the need to live together with strangers, the risk of theft.
In addition to ordinary hotels located along the busiest highways, as well as near tourist attractions, there are more specialized ones: resort hotels (located on the beaches, near natural attractions); business hotels (located in the center of large business cities, with the obligatory availability of multifunctional conference rooms, luxury apartments), SPA; casino hotels, etc.
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Diagram 1. Dynamics of the number of persons accommodated in hotels and similar accommodation facilities in 2014-2020, million people
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1.2. Dynamics of the volume of the Indian hotel market, 2017-2021
Consider the dynamics of the volume of the hotel services market in India
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The dynamics of the volume of hotel services in comparable prices is characterized by the index ""Index of physical volume of services"". It is calculated by Rosstat by recalculating the volume of paid services to the population of the reporting period according to the consumer price index in the prices of the base period and dividing by the actual volume of sales of services in the base period.
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1.3. Market structure by type of service provided in India
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The share of hotels (hotels) is much larger in terms of the number of places for accommodation compared to the number of objects - two-thirds of the market falls into this category. Hostels are also characterized by a higher density of places in each hotel-type facility.
1.4. Structure of the hotel market by Union Territories
The structure of hotel services in value terms across the union territories until 2019 was quite stable. It should be noted that the distribution of shares between the Union Territories is quite logical and is most often determined by the flow of tourists, as well as the demand for hotel services among businessmen.
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Diagram 6. The structure of the provision of hotel services in India by Union Territories in 2015-2021 (Jan.-Nov.), %
If we consider the structure of the market in terms of value by the states of India, then more than half is occupied by only 2 regions.
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1.5. Assessment of current trends and development prospects of the studied market
In the hotel market in India, the following trends and related prospects can be noted:
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According to the experts of the consulting company JLL, the new trends that hoteliers are increasingly starting to think about at the present time are:
- Active implementation of universal tools using Big Data;
- Automation and simplification of small mechanical processes to relieve hotel staff and optimize staffing;
- Focus on strategic online marketing, in which promotion processes are automated and centralized;
- Greater trust in Indian digital products that are maximally adapted to the multifunctional tasks of hotel management, taking into account the local situation;
- Transition to the mode of ""easy interaction"" with the guest, online formats that provide the guest with a quick response to the request and the exchange of documents;
- Adaptation of hotels to the Bleisure format (business & leisure / business and leisure), new MICE formats;
- In 2020, the hotel business began to provide new security - newsafety. If earlier this concept included mainly social security, then in 2020 sanitary and epidemiological security is on the agenda. The new reality will allow the hotel business to become more technologically advanced and even more creative.
1.6. Assessment of factors affecting the market
Macroeconomic factors influence the dynamics of all sectors of the Indian economy, including the hotel market. The main groups of factors are: economic, political, social and technological.
Economic
GDP (gross domestic product) is used to determine the rate of economic development of any state. GDP is a macroeconomic indicator that reflects the total value of goods, works and services that were produced and provided in the country in a year. Gross domestic product is the main indicator on the basis of which the level and pace of the country's economic development are determined.
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Demographic (social) factors
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Increasing urbanization
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The migration influx in large cities leads to an additional supply of labor, an increase in demand for domestic tourism, business trips and business trips, which stimulates the demand for hotel services.
technological
General trend towards the development of domestic tourism
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The impact of the coronavirus pandemic in 2020-2021: the closure of the borders of the states of India and the borders of India for foreigners, quarantine measures, the self-isolation regime led to a decrease in hotel occupancy to the lowest levels in 2020. Despite the fact that in 2021 the economic indicators, the activity of the population in movement and business activity are gradually recovering, the factor continues to have a negative impact on the market.
Inbound tourism trends
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After a drop in the number of inbound tourist trips of foreign citizens to India in 2016, the indicator stagnates until 2019. At the end of 2020, the number of trips shows a record ...
Holding international events in India.
It should be noted that the expansion of the geography of the presence of international hotel operators is often associated with major events of an international scale. In 2018, in preparation for the World Cup, new hotels were also built.
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Seasonality - the economy of many hotels is significantly dependent on the corresponding natural or tourist season. Beach hotels, ski resorts are sensitive to them. The factor negatively affects the market.
Political
Foreign policy relations
The tense political situation in interstate relations has a negative impact on all spheres of the Indian economy. The main activities of the state and the strategic tasks at present are the development of new models of cooperation with the US and the EU and the approval of India in the world monetary system. Anti-India sanctions and the generally sharp deterioration in relations between Western countries and India largely determine India's foreign policy.
Credit policy.
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The Government of India is actively working towards the availability of credit funds. As can be seen in Table 3 and Diagram 16, the weighted average interest rate tends to decrease in 2016-2021. Low stable interest rates will allow more confident business planning and consumer spending planning.
State regulation
As in many markets, government regulation has a multidirectional impact on the hotel market. On the one hand, various targeted programs for the development of tourism are being developed, and on the other hand, restrictions on activities are being introduced. For example, in 2019, a legislative ban on the placement of hotel facilities in residential premises came into force, as a result of which some mini-hotels were forced to stop working.
State support measures in 2020
At the end of March 2020, the government identified 22 industries that will be the first to receive state support in the context of the economic crisis and the coronavirus pandemic:
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Concluding the assessment of the factors of influence on the Indian hotel market, we will summarize the key ones in the framework of the STEP-analysis.
Table 4. STEP analysis of factors affecting the hotel market
Thus, at the moment, the Indian hotel market is experiencing a negative impact of environmental factors of medium strength.
The negative impact is manifested due to the devaluation of the rupee, a decrease in the population and its real disposable income, a decrease in the level of inbound tourism, a tense foreign political situation, seasonality, etc.
The following factors have a positive effect on the market: GDP recovery, urbanization of the population, the general trend towards the development of domestic tourism, international events in India, and credit policy.
1.7. Analysis of sectoral indicators of financial and economic activity
For the analysis of financial ratios, indicators were used according to the OKVED2 code 55.1 “Activity of hotels and other places for temporary residence”. Important data for analyzing the state of the industry is the dynamics of such indicators as profitability, liquidity, and business activity. The table shows the dynamics of the gross profit margin (the ratio of gross profit to income).
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Consider liquidity indicators in the hotel industry. The indicator of current liquidity is a measure of the solvency of the organization, the ability to repay the current (up to a year) obligations of the organization.
Diagram 18. Current liquidity (total coverage) in the hotel sector for 2015-2021 (Q1-Q3), times
The estimated indicator of the current liquidity of a normally operating solvent legal entity must be at least 1, i.e. it is necessary that the total value of current assets be greater than the amount of short-term liabilities.
If the current liquidity ratio is greater than 2, this indicates that the company has more current assets than short-term liabilities with double coverage. The company has a high ability in the short term to pay off its obligations (debts). The normative value of current liquidity equal to 2 was obtained in practice and is most often found in domestic regulations.
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A more stringent liquidity criterion is the absolute liquidity ratio. It shows what part of short-term liabilities can be repaid immediately, if necessary, at the expense of available cash and marketable securities.
Table 6. Absolute liquidity in the hotel sector in comparison with all sectors of the Indian economy, 2015-2021 (Q1-Q3), times
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Business activity is the ability of an enterprise, based on the results of its economic activity, to take a stable position in a competitive market, it is the performance of an enterprise in relation to the amount of resource consumption in the process of the operating cycle. Indicators of business activity are related to the rate of turnover of funds: the faster the turnover, the less semi-fixed costs per turnover, which means the higher the financial efficiency of the enterprise and the industry as a whole as a combination of many enterprises.
Consider the dynamics of the average turnover of receivables in the hotel industry in India.
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The stability of the financial position of the enterprise is impossible without effective management of working capital, based on the identification of significant factors and measures to provide the enterprise with its own working capital.
The equity ratio characterizes the availability of own working capital of the enterprise, necessary for its financial stability, it is calculated to assess the solvency of the enterprise.
Lack of own working capital, i.e. the negative value of the coefficient indicates that all the current assets of the organization and, possibly, part of the non-current assets are formed from borrowed sources.
Despite the positive dynamics of profitability and business activity indicators in 2021, the financial condition of the hotel industry is assessed as difficult: the provision with own working capital has gone into a deep minus, and liquidity indicators do not meet the standards have significantly decreased.
Part 2. Competitive analysis in the hotel market in India
2.1. Major players in the market
There are 3 main categories of operators in the hotel market in India:
- international hotel chains operating, among other things, hotels in India;
- Indian chain hotels, some of which also operate hotels in other countries;
- non-chain hotels and hotel-type accommodation facilities.
Most of the players are Indian independent hotels. The reason for this is the great legacy of the Soviet Union, while international operators still prefer to open and build new hotels rather than work with existing ones. The fact is that some standards are very difficult to apply when the object has already been built.
However, the top 10 hotel market includes companies from the first two groups:
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The process of growth in the importance of hotel chains in the global hotel business is characterized by a significant contradiction: on the one hand, international hotel corporations are strengthening their positions, on the other hand, many countries create and successfully operate their own national hotel chains that compete with international giants. The creation of national hotel chains can give the hospitality industry the necessary impetus to improve management efficiency and further development, since the emergence of hotel chain operators allows the application, dissemination of high standards and technologies for the functioning of hotels at the corporate level and, thereby, to improve the quality of service and the efficiency of their activities .
2.2. Market shares of the largest competitors
A key factor in determining the shares of competitors in the hotel market in India was the total number of rooms.
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2.3. Profiles of major players
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As a rule, hotels of international chains belong to the highest categories (4-5 stars), therefore their share in value terms exceeds the share in the number of rooms. At the same time, Indian operators mainly occupy the niche of popular three-star and four-star hotels.
Part 3. Analysis of hotel consumption
3.1. Estimation of hotel consumption per capita
Consumption per capita is calculated by GidMarket based on the ratio of the hotel market to the total population of India.
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3.2. Market Saturation and Estimated Market Potential in India
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Diagram 25. Investments in the ""Hotel complexes"" industry in 2022-2026, billion Rs.
Regarding the further development of the hotel segment in India as a whole, most hotel operators are positive:
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Another point is that in the current situation, tourist flows have begun to focus more on domestic supply, and part of the assets, where management did not manage to cope too well in a pandemic, is becoming an interesting object for purchase. Therefore, the development of the hotel market not only does not stop, but actively continues.
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3.3. Description of consumer preferences
Consider the structure of the hotel market, which allows us to assess trends in consumer preferences.
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As for the most popular destinations among tourists, in 2020 they were: Krasnodar Territory, Crimea and.
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3.4. Price analysis
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If the CPI for services to the population grew annually during the period under review, then according to Rosstat, the dynamics of prices for hotel accommodation until 2020 inclusive, firstly, was much calmer (the difference with the indicated CPI for all services ranged from -0,8 to - 6,1 p.p.), and secondly, in 2019 and 2020, prices for hotel services decreased - the CPI was less than 100%.
The opposite picture was observed in 2021 – by raising prices by more than ...% on average, hotel management made attempts to compensate for part of the losses incurred in 2020.
The dynamics of prices for hotel accommodation during the period from 2015 to 2020 was uneven across the union territories:
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Part 4. Assessment of factors of investment attractiveness of the market
Negative factors of the investment climate of the hotel market dominate over the positive ones.
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Part 5. Forecast for the development of the hotel market until 2026
In the first half of 2020, the entire event industry, along with the tourism and hospitality industries, were the first to feel the effects of the pandemic.
Let us present data on the impact of recent crises on the industry (the global crisis of 2008 and the currency crisis in India in 2014) using the example of two capitals.
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According to CBRE experts, the key trends for 2020-2021 are:
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Part 6. Conclusions on the prospects of creating enterprises in the study area and recommendations for current market operators
In India, every year until the beginning of 2020, the demand for hotel services increased at a moderate pace, such indicators as the number of hotels and similar accommodation facilities, the number of rooms, the number of beds in hotels, the number of overnight stays and the number of accommodated persons had a linear dynamics to increase.
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Among the most obvious effects of the COVID-19 pandemic, affecting mainly urban properties, survey participants cited a change in booking depth, which has been reduced to an average of two to three weeks. Market players indicate that it is difficult for customers to plan trips in the face of uncertainty. In turn, business lost its seasonality, which made it more difficult to make forecasts, budget and service loans. According to the study, there were also difficulties with operational activities, in particular, the search for line personnel, which is one of the sides of the widespread shortage of migrants.
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All groups of factors have multidirectional influence.
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At the same time, there are various options that new market participants should consider when determining the format of work:
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Diagrams
Diagram 1. Dynamics of the number of persons accommodated in hotels and similar accommodation facilities in 2014-2020, million people
Diagram 2. Dynamics of the hotel market volume, 2015-2021 (est.), billion Rs.
Diagram 3. Index of the physical volume of services provided by hotels and similar accommodation facilities in 2015-2021 (Jan-Sept), in % to the previous year
Diagram 4. Structure of the hotel market by types (by types of hotel-type organizations) in 2015-2020, %
Diagram 5. The structure of hotel-type organizations by the number of places for accommodation in 2015-2020,%
Diagram 6. The structure of the provision of hotel services in India by Union Territories in 2015-2021 (Jan.-Nov.), %
Chart 7. The structure of the provision of hotel services in India by state in 2021 (Jan-Nov), %
Chart 8. India's GDP, 2012-2021 (Q1-Q3), % to the previous year
Chart 9. Monthly dynamics of the US dollar against the rupee, 2015-2021, Rs. for 1 US dollar
Diagram 10. Population dynamics in India as of January 1, 2010-2021, million people, %
Diagram 11. Population forecast in India for the period 2021-2024, million people
Diagram 12. Dynamics of real incomes of the population of India, 2011 - 2020, 2021 (Q1-Q3), % to the previous year
Diagram 13. Dynamics of the number of tour packages sold to the population in India in 2015-2020, thousand units.
Diagram 14. Dynamics of the number of Indian tourists sent by travel companies on tours in India in 2015-2020, thousand people
Chart 15. The number of inbound tourist trips of foreign citizens to India in 2015-2021 (Jan-Sept.), thousand units
Chart 16. Dynamics of the average interest rate on loans, 2015-2021 (Jan-Jun), %
Chart 17. Profitability before tax (profit of the reporting period) in the hotel industry in comparison with all sectors of the Indian economy, 2015-2021 (Q1-Q3), %
Diagram 18. Current liquidity (total coverage) in the hotel sector for 2015-2021 (Q1-Q3), times
Chart 19. Business activity (average term of receivables turnover) in the hotel sector, for 2015-2021 (Q1-Q3), days days
Chart 20. Financial sustainability (capacity of own working capital) in the hotel sector, in comparison with all sectors of the Indian economy, 2015-2021 (Q1-Q3), %
Diagram 21. Shares of the largest competitors in the hotel market in 2021, %
Chart 22. Shares of major competitors in the hotel market in 2021 by room rental income, %
Diagram 23. The total revenue of the largest hotel market operators (TOP-10) in India in 2021, billion Rs.
Chart 24. Volume of hotel consumption per capita, 2015-2021 (est.), Rs./person
Diagram 25. Investments in the ""Hotel complexes"" industry in 2022-2026, billion Rs.
Figure 26. Projects of the industry ""Hotel complexes"" on the map
Chart 27. Interest of hotel operators in the largest hotel markets in India in 2021, points
Diagram 28. Shares of persons accommodated in hotels and similar accommodation facilities, by purpose of travel in 2015-2020, %
Diagram 29. Shares of persons accommodated in hotels and similar accommodation facilities, by length of stay (overnights) in 2019, %
Diagram 30. The number of Indian tourists sent by travel companies on tours in India in the main directions in 2020, thousand people
Diagram 31. Regions with the largest number of overnight stays in Q1-Q3 2021, units
Diagram 32. Market share by types of hotels in 2019, %
Diagram 33. Forecast of the hotel market size in 2022–2026, billion Rs.
Tables
Table 1. Main indicators of the hotel market in India in 2014-2020, units rev.
Table 2. Urban and rural population in India in 2014-2021 (as of January 1), million people, %
Table 3. Weighted average interest rates of credit institutions on credit operations in rupees, excluding PJSC Sberbank (% per annum), 2015-2021 (Jan-Jun)
Table 4. STEP analysis of factors affecting the hotel market
Table 5. Gross margin of the hotel industry in comparison with all sectors of the Indian economy, 2015-2021 (Q1-Q3), %
Table 6. Absolute liquidity in the hotel sector in comparison with all sectors of the Indian economy, 2015-2021 (Q1-Q3), times
Table 7. Main companies participating in the hotel market in 2021
Table 8. Basic information about participant No. 1 of the hotel market
Table 9. Basic information about participant No. 2 of the hotel market
Table 10. Basic information about participant No. 3 of the hotel market
Table 11. Basic information about participant No. 4 of the hotel market
Table 12. Basic information about participant No. 5 of the hotel market
Table 13. Consumer price indices in the hotel market in India in 2015-2021 (est.), %
Table 14. Average prices in the hotel market (accommodation in a hotel (hotel i-ii category or 2-3 *) in a double room per person) in the Union Territories in 2015-2020, Rs. / day days
Table 15. Average prices in the hotel market (depending on the category) in the Union Territories in 2021, Rs. / day per person
Table 16. Assessment of factors of investment attractiveness of the hotel market
Table 17. Forecast indicators of the development of the Indian economy in 2021-2024 (base case), %
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