Hospitality Sector To Help Revive Real Estate In India

The real estate sector might be going through a slowdown but the associated sector, hospitality, is witnessing a skewed growth. Both Indian and international hotel chains are expanding across the country, driven by the rising number of leisure as well as corporate travellers. A look at how this planned expansion of the hotel industry trigger growth of real estate in India.

Hotels plan expansions

Hotel chains in India are becoming more confident about expansion. The confidence comes from a growth in foreign tourist arrivals. Some of the latest expansion plans include:

• Wyndham Worldwide, a hotel brand franchisor with 25 properties in India, plans to add 50 more properties across the country in next three years. Moreover, it plans to take the number beyond 1,000 in next 10-25 years.
• The global luxury hotel chain, Ritz Carlton, plans to add 30 more properties in next five years. In next two years, it will reach the mark of 100 properties by adding over 10 more hotels.
• Iowa-based leisure company, Belmond, intends to set base in India, too. The company is exploring Delhi and Mumbai for expansion.
• France-headquartered Accor group, too, is betting big on the Indian travel market, as it aims to open over 50 hotels in next five years.

Business-based travel key contributor

According to Global Business Travel Association, India's total business travel spend is projected to grow 9.8 per cent in 2015 and 10.9 per cent in 2016. After 2011, it is in 2016 that India will see double-digit spending gains.

The report, released in April 2015, said business travel spending was at $26 billion in 2014 and is expected to grow to $45 billion in the next five years. Indian hotels are expecting 15 per cent increase in corporate travellers during the peak season.

The signs of revival in business travel to India is pushing hotels to plan expansion.

Mixed-use projects

A slowdown in home sales in India has made it a tough road for real estate developers in past few quarters. The growth in hospitality sector is expected to give the much-needed demand boost to the sector. Developers are joining hands with hospitality chains to develop mixed-use properties, which offer new-age serviced apartments, along with hotel rooms, business park, and even retail arcade.

While some developers are integrating hospitality chains with large business parks, some are planning mini-townships, a model popular in China. These will be mix properties with residential, commercial, and hospitality, all woven into one.

With global hospitality chains planning to invest here in a big way, developers can partner in the business either as owners or tenants. These partnerships are a win-win for both. An early entry of a global hotel chain as an investor in a realty project can be a booster for its branding and attract other tenants.

It will not be surprising, if the focus now shifts to hospitality partnered realty developments.