Indian hotels sign more contracts in 2021 versus foreign counterparts: Report

Leisure destinations led the way in terms of properties being signed up, accounting for 49% of all hotel signings during the year. Hotel signing refers to hotel management firms taking on contracts from individual owners to focus on an asset light model.

The report ‘India Hotel Industry Overview 2021’ said that close to 15,500 new branded hotel rooms were added to the country’s inventory of about 1.4 lakh such rooms in 2021. Of this, 135 were new hotels with over 12,000 rooms. Another 58 hotels with 3,108 keys were rebranded during the year, a trend similar to the one seen prior to the pandemic.

Domestic hotel operators signed close to 80% of all properties in the country in 2021. However, these were smaller properties with lower room count of about 65 to a hotel compared to international companies, which had an average key count of 133 the same year.

In terms of number of rooms signed, Tata Sons-owned Indian Hotels Company Ltd., Marriott, ITC, Wyndham, and Sarovar were the top five hotel operators. As operators made stronger inroads into the country’s smallest towns, tier 3 and 4 cities accounted for 51% of the total signings by properties in 2021. In contrast to the previous year, in 2021 the share of the tier 1 cities in terms of signings by keys inched closer to pre-covid levels.

Covid-19 has had an impact on greenfield or new developments. As a result, the share of greenfield keys signed declined to 32% in 2021 from 39% in 2020. Conversion and rebranding of hotels, meanwhile, accounted for 20% of the keys signed during the year.

Brownfield projects are being considered less risky following the pandemic and have a higher likelihood of completion than greenfield hotels. About 47% of all hotels signed were brownfield properties while greenfield properties accounted for 23% of total signings by properties. Hotel rebranding or conversion is on the rise, accounting for 30% of total signings by hotels in 2021.

The maximum rooms or keys were signed in Bengaluru which accounted for about 1,570 rooms followed by Delhi which had about 970 rooms added. Jaipur added about 830 rooms and Mumbai about 570.

The most popular category of hotels was the mid-scale. The segment has become the largest sub-segment among branded hotel supply in the country. Mid-scale hotels are typically positioned between luxury and budget hotels.

“In 2021, domestic leisure and business travel demand strengthened dramatically, encouraging hotel operators to proceed with their planned openings; 8,488 branded keys opened their doors to guests, up 95% from the previous year and only 9% lower than 2019 levels,” said Mandeep S Lamba, HVS President of India & South Asia for the consulting firm.

However, due to the erratic nature of travel demand following the pandemic, some hotel operators chose partial opening of their properties. “By opening 76% of the properties during the year, domestic brands maintained their lead over their international counterparts,” he said.

Lamba added that about 8,800 hotel rooms are expected to be signed in 2022, which will be about 120 hotels. “We expect occupancy and average room rates, too, will return to pre-pandemic levels by the end of calendar year 2022 & by mid calendar year of 2023, respectively.”