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Hotel investments in India surged to $401 million in 2023, marking an almost four-fold increase from the levels seen in 2022. A report by JLL titled "Hotel Investment Trends - India 2023" also revealed that 25 per cent of the total transaction value comprised under-construction hotels in both business and leisure destinations.
High Net Worth Individuals (HNIs) and institutional capital were key drivers of hotel investment activity in 2023, comprising the largest share at 31 per cent. Real estate developers accounted for 27 per cent of investments, with owner-operators following closely behind at 11 per cent, said the report.
Additionally, the report highlights that the first quarter of financial year 2024 saw an approximate 80 per cent year-on-year surge in hotel transaction volumes, reaching $78 million.
The sector has experienced a notable upswing since 2023, witnessing a record number of hotel signings and openings. In 2023, a total of 25,176 keys were signed, with 12,647 keys subsequently opened.
There is also a growing interest in hotel development activity within Tier-2 cities, where 54 per cent of total signings occurred, according to the report.
2023 sees 22 hotel transactions
In the year 2023, there were 22 hotel transactions, marking a significant achievement. This figure represents the highest number of assets traded in the past decade. Additionally, three hotel companies successfully debuted on the stock market through their Initial Public Offerings (IPOs).
Moreover, there was notable growth in greenfield projects during the same year, with approximately 13,600 keys added, surpassing the previous year's figure of 8,000 keys. This trend underscores the sustained confidence of hotel developers in the sector's long-term growth prospects.
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Furthermore, the report notes the emergence of tourism and leisure destinations as centres for Meetings, Incentives, Conferences, and Exhibitions (MICE) activities, with the signing of three large-format hotels with a total of approximately 900 keys.
Uptick in lease and revenue share models
While management contracts remain prevalent, accounting for 78 per cent of the total number of keys, there has been a noticeable uptick in lease and revenue share models across different tiers, representing four per cent of the overall keys signed. The thriving performance of the commercial sector has particularly benefited major urban areas, with Tier 1 cities witnessing a significant surge in keys signed since 2020, showing a remarkable 31 per cent increase compared to 2022.
The upper upscale segment witnessed the most significant turnover of hotel properties, trailed by the upscale, luxury, and midscale segments.
In 2023, five transactions were conducted via the insolvency resolution process under the purview of the National Company Law Tribunal (NCLT), constituting 33 per cent of the aggregate transaction value, equivalent to USD 133 million.
“The year 2023 has been a record year not only in terms of hotel investments but also in terms of new branded hotel openings and signings. Furthermore, 2024 has started with strong tailwinds as we saw prominent hotel deals early on in this year. The enthusiasm of the sector is further strengthened by the performance of hotel stocks, which also gave confidence to a couple more hotel companies entering public markets and achieving strong valuations," Jaideep Dang, managing director, Hotels and Hospitality Group, India, JLL, was quoted as saying by Hindustan Times (HT).
“We expect this story to continue in 2024 on the back of diversified avenues of growth such as expanding commercial office markets and with the development of infrastructure such as new airports, expressways, increasing pilgrimage travel leading to the emergence of new realty and tourism hotspots across the country,” he added.
