Luxury hotels in India are having a good time; thanks to domestic tourists

Domestic tourists now account for as much revenue for hotels as international travellers

Indian travellers are splurging like never before and spends are not limited to overseas travel. The domestic luxury and branded hotels are registering an increase in the share of revenue coming from the domestic leisure travellers. These travellers are not just staying at top end hotels for holidays but also spending a significant amount of money within the hotel during the stay.

Chinmai Sharma, chief revenue officer at Taj Hotels told Business Standard that the domestic leisure travel is the fastest growing category for the hospitality chain. The company’s overall leisure segment (domestic and international put together) is growing at 10-11 per cent but within this, the rate of domestic leisure travel is even higher. “Not more than three years ago, the international leisure travellers accounted for as much as seventy per cent of our leisure business and rest came from domestic tourists. The share is now equally split between these two categories,” said Sharma.

According to Taj Hotels, spends of the Indian leisure travellers during the hotel stay is comparable if not higher to foreign guests on food and beverages, spa, retail, etc. Taj Hotels gets approximately half of its revenue from leisure travellers and rest from corporate clients. 

In its FY17 annual report, luxury hotel firm EIH (which runs hotels under Oberoi brand) said the “dependence of the hospitality industry on the Indian leisure and corporate traveller has increased. This trend will continue in the coming years”. The company said it witnessed an impact on arrivals from the Western Hemisphere and in particular the United States due to a slowdown in the global economy. 

According to the ministry of tourism, the number of visits by domestic tourists increased almost 13 per cent to 1.613 billion in the calendar year 2016, the latest period for which data is available. The trend is estimated to have continued in 2017 due to enablers like low fares in domestic air travel and expanding connectivity between different locations. 

Raj Rana, CEO (South Asia), Radisson Hotel Group said leisure travel is the fastest growing segment for hotels as more people are talking a higher number of holidays that before. “An overseas visitor stays for longer duration and spends during the stay is, therefore, lower than a domestic visitor who takes shorter but frequent breaks. We see a surge in contribution from domestic leisure travellers at leisure destinations during the summer season when the schools are closed”, he added. Hotels now look at the total revenue per available room which includes spends on F&B, spa and retail besides the room. Rana said the growth in revenue per available room from domestic leisure travellers is healthy.   

A spokesperson at Lemon Tree Hotels said the company’s business hotels have witnessed an increase in local/in city guests for weekend staycations. “We too have witnessed an increase in spends by Indian leisure travellers both in terms of the number of vacations taken (in India) every year and in terms of hotel usage. This is due to an increase in disposable incomes/double income nuclear families and online travel agents (OTAs) aggressively pushing sales through promotions and cash back offers,” the spokesperson said. 

Hilton, which is looking to expand its portfolio of hotels beyond the current 17 hotels, is focusing more on resort hotels in leisure destinations than on business hotels. “Resort locations have lower occupancy but they offer higher realisation. The supply in leisure is less and therefore resort hotels are seeing a good business. There is a good opportunity,” said Navjit Ahluwalia, country head at Hilton India.