In the last few months, several major real estate and hospitality companies in India have announced significant investments and expansion plans for the hotel sector. Last month, Prestige Estates Projects, a Bengaluru-based real estate firm focused on southern India, signed a deal with Marriott International to manage six upcoming hotel projects with a combined budget of INR 4,250 crore (approximately USD 500 million).

In March, Mumbai-based DB Realty announced plans to demerge its hospitality division into a new subsidiary called Advent International Ltd. to be listed on stock exchanges. The company recently hired hospitality veteran Rahul Pandit to expand this hotel's arm and manage assets worth INR 2,300 crore.

Property developers with large hospitality businesses, such as K Raheja Corp. which runs Chalet Hotels Ltd, have each earmarked at least INR 10,000 crore to develop or manage hotels across India in the next 5-7 years. This is due to the rapid growth seen in the hospitality sector.

Rahul Pandit, who now leads DB Realty's hospitality division after previously working with Lemon Tree Hotels and Indian Hotels- operated Ginger, said yields from assets like offices and retail are lower globally while there remains plenty of room for new hotel supply in India.

Major international chains are also looking to invest significantly in India's booming hospitality industry. Hyatt Hotels Corp.'s CEO Mark Hoplamazian said in an interview that the company is focused on the luxury hotel segment in India.

Mumbai-based developer House of Abhinandan Lodha plans to invest INR 2,000 crore to construct five luxury hotels in cities known for their spiritual, cultural or tourism attractions-Varanasi, Vrindavan, Amritsar and Shimla. It has also partnered with The Leela Palaces to develop a 100-room luxury hotel in Ayodhya by 2028.

Consumer conglomerate DS Group, which has been in the hospitality business since 2000 and owns five 5-star properties Including Holiday Inn Express in Kolkata and Radisson Blu Hotel Guwahati, last year earmarked about INR 1,000 crore for its hotels division.

Bamboo Hotel Global Centre (Delhi) Pvt. Ltd, a joint venture between Prestige Hospitality and Marine Drive Hospitality & Realty Pvt Ltd, is set to construct India's largest integrated hotel complex at Delhi Aerocity. As for Bengaluru-based developer K Raheja Corp., its hospitality arm Chalet Hotels in March acquired a Courtyard By Marriott resort for INR 315 crore. Chalet Hotels has earmarked INR 2,000 crore to reach a total room count to 5,000 in the next three-four years.

Another Bengaluru-based developer, Brigade Enterprises, recently signed a deal with global hotel company IHG to develop an Intercontinental Hotel in Hyderabad.

The hotel sector is experiencing a golden era driven by high demand coupled with limited supply growth, according to Mandeep S. Lamba, president and CEO of South Asia for hospitality consultancy HVS Anarock. This optimal situation is creating an attractive investment climate.

Strong traveller demand over the past two years has provided a solid foundation, allowing hotel companies to not only recover from the pandemic but achieve their best financial performance in fiscal year 2023 and FY24.

A recent HVS Anarock analysis of India's top 23 listed hotel companies by market capitalization found these companies experienced a significant turnaround in FY23, with year-over-year growth rates doubling on average in the post-COVID recovery.

As the Indian hotel industry matures, funding is shifting from individual investors to more organized institutional funding. Hospitality sector investors are becoming more focused, selective, and interested in larger deals. This could lead to consolidation as big players expand their portfolios through acquisitions and investments, gaining significant influence over standards and market dynamics. India currently has an estimated 180,000 branded hotel rooms.

Between 2007-2023, branded or organized hotel supply grew 8.37% annually on average, with over 10% growth in Ahmedabad, Bengaluru, Pune, and Jaipur, per HVS Anarock. However, demand continues outstripping organized sector supply, driving up room rates. This explains the increased interest in the segment. Revenue per available room (RevPAR) reached INR 4,662-4,940 in 2023, a significant 29-31% rise from 2022 and 19-21% from pre-pandemic 2019. The occupancy rate last year improved by 3-5 percentage points to 63-65%, but short of the pre-pandemic level of 65-67% in 2019.

HVS expects India-wide occupancy to improve to 66-67% this year, which coupled with a 6-8% increase in average room rates, will likely push up RevPAR to INR 5,281, which would be 31-33% higher than in 2019.

In conclusion, India's hotel sector is experiencing strong growth driven by high demand and limited new supply. Major companies are doubling down on the sector through large acquisitions and investments. While occupancy and rates are rebounding from pandemic lows, industry experts expect further improvements in the coming years. With continued robust travel demand and consolidation of the industry, the outlook remains positive for major players in India's thriving hospitality market.