Indian Hospitality Industry: Navigating Recovery and Embracing Transformation in 2023

In the dynamic landscape of India's travel and tourism industry, 2023 marks a year recovery. This is the key finding of the inaugural Indian Accommodation Barometer – a joint project between Booking.com and Statista.

Building on the positive momentum initiated in 2022, a truly robust revival is in the works. Despite some persistent challenges, the sector is witnessing a surge in domestic travel enthusiasm. Excitement is palpable among Indian hoteliers as they eagerly anticipate the return of international visitors.

Domestic Enthusiasm Steers Recovery

While inbound travel experiences a gradual comeback, domestic tourism emerges as a driving force, steering the industry forward. Over half of Indian accommodation providers report positive business developments in the past six months. For everyone dissatisfied with the present state of affairs, there are almost 4 hoteliers who are content. Perhaps, most importantly, 45% of those surveyed foresee a bright economic future for their businesses in the next six months.

In the world’s most populous country, the business sentiment among accommodation providers continues to remain strong with nearly half (49%) reporting an increase in average room rates and an even higher number (55%) reporting an increase in occupancy rates over the past 6 months. Access to capital is widely seen as an area for improvement and the balance of investment plans tilts slightly towards increases in the coming 6 months.

Divergence Among Accommodation Types

Despite an overall positive outlook, notable differences emerge when examining various accommodation types. Hotels outshine short-term rentals (STRs), with higher-star hotels, especially 4- or 5-star establishments, exhibiting significantly superior performance compared to lower-star counterparts. This performance gap extends to both past and future expectations, with luxury hotels emerging as clear winners in India's travel rebound.

Challenges Amidst Optimism

The rise in energy costs and taxation poses significant challenges for Indian hoteliers, with three-quarters citing energy costs and taxation as major concerns. Economic uncertainties are more pronounced for lower-star hotels and STRs. As the industry eagerly awaits the normalization of inbound travel, attracting international tourists is identified as the most significant growth opportunity by 88% of surveyed hoteliers.

Attracting families (78%), offering local experiences (72%), attracting more domestic travelers (72%) and spiritual tourism (64%) are the other leading opportunities Indian hoteliers are excited about going forward.

Gastronomical experiences play an important role in the industry’s profit margins, with 39% of accommodation providers claiming food and beverages make a significant contribution to the business while only 5% mentioned that serving food and beverages reduced revenue. Less than a quarter (16%) claimed that they do not serve food or beverages at all. Adapting to changing food preferences is also important with 41% of accommodation businesses stating that featuring vegan and/or vegetarian food on their menu is becoming more important.

Embracing Digital and Green Transformations

Reflecting their positive outlook, Indian hoteliers expressed a willingness to invest in preparing for the future. More than two-thirds self-reported plans to allocate resources for digital transformation and sustainability. Notably, those with stronger economic performance are more inclined to make such investments, emphasizing the connection between financial health and forward-looking strategies.

Accommodation providers say they are investing in different sustainability categories: energy efficiency tops the list (46%), followed by waste reduction (45%) and water preservation (26%). One in five (20%) hoteliers also share that they are taking initiatives to reduce greenhouse gas emissions caused by their accommodations and 16% say they are working towards the preservation of natural resources. 24% reveal that they are supporting the local economies by sourcing their products and services locally. Fiscal and tax incentives were deemed by two-thirds (62%) of Indian hoteliers surveyed to be the most important factor supporting the hospitality industry's efforts to become more climate-friendly and sustainable.

AI Adoption Path

The embrace of artificial intelligence (AI) within the travel accommodation sector – an inherently human-centric business – is yet to manifest itself. In India, only 3% of those surveyed said they already use this novel technology. However, a quarter communicated a willingness to explore AI in the coming months. Of those interested in AI, chain hotels are much more likely than independent hotels (8% vs. 2%) to have already deployed it, while similar shares (24% vs. 26%) say they have it in the pipeline.

Strategic Priorities for Growth

Indian hoteliers prioritize strategies such as offering targeted discounts, promoting on social media, and enhancing the comfort and aesthetics of accommodations to maximize occupancy. While AI is recognized as a digital tool, it doesn't dominate the investment priorities.

Government's Role in Shaping the Future

Although no longer the sole determinant, government policies still wield influence, with 44% of Indian hoteliers acknowledging their importance. However, nearly a third perceive these policies as harmful, with taxation identified as the most detrimental factor. Infrastructure investments, public transportation, high-speed internet access, and financial support, especially in the form of loans and subsidies, are areas where hoteliers believe the government could play a pivotal role in fostering industry growth.

In conclusion, the Indian hospitality industry's trajectory in 2023 is characterized by resilience, domestic enthusiasm, and a strategic embrace of digital and green transformations. While challenges persist, a forward-looking mindset among hoteliers, coupled with government support, positions the industry for sustained recovery and future success.