Delhi and Mumbai Among Best Performing Hospitality Markets in the Region, Strong Domestic Travel Growth to Drive Demand in India: Colliers International India

News Desk July 2, 2019

3 minutes read

Gurugram, India, March 6, 2019 —

The Asia Pacific region is expected to lead the way for global growth in 2019, with the International Monetary Fund expecting the region’s GDP to rise by 5.6% this year, compared with a global increase of 3.9%. China predicted to grow 6.4% in 2019, and India, predicted to grow 7.3%, will again lead the way.

Hotels across the Asia Pacific have had a mixed performance in 2018, with overall room occupancy and average daily rate (ADR) showed a slight increase at 70.6% and US$102.47, respectively. This resulted in RevPAR for the region showing growth of some 1.5% for the year. However, its noted this figure may have well been improved given ADR would have been negatively impacted by forex currency movements rather than economic fundamentals. In terms of room occupancy, Bali, Beijing, Delhi-NCR, Jakarta, Mumbai and Taipei were the stand-out performers, with year-on-year growth in excess of 2%, according to STR. Hanoi, KL, Osaka, Phuket, Sanya and Shanghai being the worst performers.

The Q1 2019 edition of Colliers Hotel Insights features key destination trends across Asia and insights on topical issues within the gaming and leisure sectors. Some of the common themes in India and across the region include product differentiation in an increasingly crowded market, use of automation and AI, as well as renewed focus on loyalty programs. Mirroring regional trends, developers in India and other markets in South Asia, including Nepal, Sri Lanka and Bangladesh are investing to create destinations catering to the experience economy. The focus this quarter is on Laos, one of the countries India is actively engaging with under its Act East Policy.

“India crossed 10 million FTAs in 2017, with further 5.2% growth in 2018. Unlike some of the other markets in the Asia Pacific, strong growth in domestic travel in India will continue to drive hospitality demand. Whilst more established markets remain relatively illiquid, offering low yields, investors are prepared to accept more risk in markets like India with strong medium to long term economic fundamentals. In India, investors are particularly excited about India’s growing middle class, demand for experiential travel among millennials, and mobile penetration – leading to aggressive expansion by aggregators like Oyo, with a focus on hotels, and Airbnb, with a focus on homestays,” says Aashish Agarwal, Head-Consulting Services at Colliers International India.

The government’s recent effort to solicit private sector participation in six airports resulted in 32 bids from 10 companies, and is expected to accelerate the pace of leisure, MICE and hospitality developments in these cities. As more Indians return home, and reforms continue to push the population out of the middle class trap, as expected this market, especially given its size and potential per capita spend per tourist, to increase rapidly should India become freed from its middle income dilemma.

Recent escalation in the trade dispute and political impasse between the USA and China is likely to weigh on business and consumer confidence, thereby tempering future demand growth. This will be combined with potential movements in forex, with some destinations likely to benefit at the expense of others. However, intra-Asia and growing domestic travel in the larger destinations across Asia, is likely to continue to underpin demand in the region.

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