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Tuesday, January 7, 2020, 17:06 Hrs  [IST]

Although nothing changes drastically with the turn of a Calendar to a New Year, certain trends do pick up momentum over others and few others either die down or get subdued. Every industry tracks the market trends while going into a New Year, and do assess the kind of impact those trends will have on the business and industry in the course of time. Travel, tourism and hospitality industry largely being discretionary spending, a whole lot of macro and micro factors do get into the decision of indulgence. Industry stakeholders have to have a fair understanding of those factors so that they make the right movements at the right time for a better business sense.

The Year 2020 would not be a cake-walk for the travel and tourism industry. Along with the economic slowdown, the political discourse in the country is also expected to pose challenges for the business and industry, if the indications of the last few months are anything to be believed.

However, the hotel industry's confidence in the country's economy and people's appetite for lifestyle products is intact. Therefore, Hospitality Biz approached the Hotel industry pundits to understand the 'key factors that will define and determine Hotel business in 2020'. While 'environment and sustainability' was a common factor everyone considers critical, government initiatives, technology, investments, revenue management, et al., were also listed as key defining TRENDS to be watched out for by people.

  • The continued growth of the wedding business segment: With the overall economy having witnessed a flattish year, one business in India that continues to see momentum is that of weddings. While the recession-proof nature of the Indian wedding business may be debated at length, with other customer segments such as Commercial and Leisure travel facing some pressure, one segment that hotels can turn their attention to in 2020 is social MICE and weddings.

  • The rise of boutique, experiential, small inventory get-away resorts: The focus of leisure travel has been increasingly shifting from relaxation and rejuvenation to culturally immersive experiences in recent years. With this shift comes a rise in boutique resort offerings characterised by small inventories, locally-curated experiences, and personalised, well-crafted services. As travellers look for off-beat, 'Instagram-able' vacation destinations, such offerings in get-away locations are set to become more widespread in 2020.

  • Renewed focus on Total revenue management: The much talked about concept of Total Revenue Management could continue to gain popularity in the hotel industry, especially given the economic scenario foreseeable in the coming year. With reduced travel and greater price-sensitivity estimated in 2020, hotels need to not only maintain room revenue budgets but also find ways of optimizing revenue from all other income-generating avenues such as transportation, food and beverage, banquets spa, etc.

  • Fresh infusion of capital and institutional investors for new hotel projects: 2019 witnessed SEBI giving the nod for Chalet Hotels Limited's and SAMHI Hotels' IPOs. Brookfield Asset Management entering the Indian hotel market with the acquisition of the Hotel Leela Venture portfolio was another key development. Another milestone this year, 10 years after the first draft guidelines for a REIT were prepared by SEBI, was the Embassy Office Parks REIT IPO. For a developing market such as India, Embassy Parks REIT has certainly paved the way for dedicated hotel REITs in the future.

  • Environmental Sustainability: The water shortage in key Indian cities is a wake-up call for many. As hotel brands and consumers alike become more conscious of their responsibility towards the environment, the coming year may witness more international, as well as, home-grown brands joining in to make their operations more environmentally friendly creating a positive impact for society and the planet.

  • Recognition & Growth of Ancillary: Hotels will increasingly look at non-core revenue streams (NCR) by utilising existing infrastructure for newer business opportunities. This could include using food delivery platforms, conducting weight management & wellness programs, having dedicated area for co-working spaces, monetizing car parking spaces, leasing kitchens for cloud kitchen, etc.

  • Sustainability: With the new age traveller giving sustainability a thumbs up, more and more hotels will look at turning green by building greener hotels and using more environment-friendly products. We are already witnessing a movement to reduce and remove single-use plastic in hotels. This will see larger traction over the next couple of years.

  • Soft branding: the growth in non-conformist hotels which are more experiential and differentiated by design without the typical norms followed by conventional branded hotels is a trend we expect to increasingly see. This will lead to traditional brands increasing their distribution through the use of soft branding support while not needing to be bound by the traditional brand standards.

  • Demand growth in small-town leisure destinations: With road, rail and in particular air connectivity improving at a rapid rate along with the corresponding improvement in related infrastructure, the travel to smaller and lesser-known towns and cities is expected to find favour with travellers. This will drive investments in building well designed and well-managed hotels, resorts and glamping sites in those smaller city locations.

  • Changes in workforce management:with the global changes in the places of work and the management of a millennial workforce, hotels will also start making much-needed changes to improve retention of employees. 5-day work week with flexible working hours and smarter employee areas in the hotels will soon become a practice.

  • Macro-Economic Factors: The hospitality industry was poised for a good run in 2020 with reduced levels of new supply in key markets and an increase in spending power for domestic traveller. However, recent months' performances and economic scenario have put somewhat of a dampener on the same. Macro factors will play a major role in determining how the year pans out for the hotel industry.

  • Power of distribution:The power of distribution has begun flexing its muscles in India with local and independent chains being unable to compete with bigger chains that have scaled distribution worldwide and more importantly within the country. This trend is likely to continue going forward and one must do all they can to stay at the head of the curve or risk being swept aside.

  • Access to Capital: For the industry to grow, access to capital is required as we are a capital intensive industry. Debt has been difficult to come by given the illiquidity in the market and the added taboo that Hotels are high-risk asset class. This significantly impacts the growth of the industry.

  • Manpower & Cost controls: The country is facing growing stress of a qualified and trained workforce. High turnover plagues the industry which is not good for the health of the industry. In addition, costs need to be kept in control especially given the economic uncertainty.

  • Government Push: Be it for streamlining GST, Infrastructure status, tourism campaigns and other tourism-related infrastructure, the government must provide support for the industry, if it is to thrive.

    • Growth in travel and hotel bookings:The hospitality industry is displaying strong resilience against the current economic trends compared with other industries affected due to the drop in consumption. For Chalet Hotels, the GST announcement is an opportunity to focus on expanding the existing portfolio and to strengthen our efforts for fresh investments.

    • Accelerated hotel projects development: The recent announcements on GST and Corporate Tax reduction are expected to bring relief for the hospitality industry, as this is a much-needed tariff correction. At Chalet Hotels we expect this to spur demand across all segments of the business.

    • Embracing Sustainability: Millennial travellers are conscious of the environment and thoughtful in their consumption in terms of whether it impacts the overall eco-system. In order to connect with this trend, it is essential for the hospitality industry to take initiatives and establish trust among their stakeholders including guests and employees.

    • Ease of Doing Business and Foreign Tourist Arrivals: The government's growing interest in the segment through various initiatives, such as, the recent GST announcements and relaxation in E-Visa policies will boost the expansion of business and further strengthen the economy, as a result of which we can expect more job opportunities. Finally, the continuation of 'ease of doing business' initiatives will help accelerate infrastructure development.

    • Employment and Job Creation: The industry is at an interesting juncture where there are possibilities of creating more opportunities for individuals pursuing their goals in the hospitality industry. It is estimated that hospitality and tourism account for one in every six jobs in India.

    • Technology: The hospitality industry is highly competitive and ever-evolving. In 2020, technological advancement will continue to be vital and guests will expect more from hotels. Disruptions in mobile, AI, VR, applications will be the key. With increased social networking among consumers, hotels will invest more in social media handles.

    • Sustainability: One of the most important trends will be the increased focus on sustainable hospitality. Hospitality brands have already started with multiple initiatives and programs to promote sustainability. There will be an additional focus on global carbon emission compliance, waste reduction, reducing plastic usage, saving water and much more. We expect to see growing adoption of several innovative 'green' initiatives, with a specific focus on zero plastic, reduction in carbon footprint, reduced wastage of food etc.

    • Focus on delivering Experiences: We also see more operators turning their attention to adding an 'experiential' touch with flavours of 'local culture and traditions' even in city-based business hotels.

    • Digital transformation: Digital will continue to grow in 2020. A number of leading operators are working on their own apps that will allow guests to even check-in and gain access to their rooms and other services. Customer experience and convenience is high on the agenda.

    • Policies: The revised GST slab will encourage travellers to continue travelling in the coming year. In certain cities, such as Bengaluru, with many leading companies across sectors opening up operations will result in an influx of business travel that will keep the books busy throughout.

    • Effect office stock leasing &absorption: Business cities such as Mumbai, Hyderabad, Bangalore, Pune, Delhi and Gurgaon could witness growth in occupancies and perhaps marginal increase in room rates. This is largely owing to increasing office lease and absorption trend. According to JLL Report, year 2019 has witnessed the highest office stock leasing & absorption of 46.5 Million Sqft. across seven major business cities of India. This records a growth of 40% over last year.

    • Hotel development: Suburban locations within the metro cities could witness new development linked to office parks and shopping malls.

    • Transaction Market: On the other hand, hotel sale transactions activity could see some momentum in 2020. This would be on back of challenging debt markets, where in new hotels or assets nearing completion may continue to find it tough to obtain debt. Therefore, equity investors may get to see some worthy opportunities to transact, which can set the ball rolling.

    • Demand for Ready assets: Demand for land to build hotels will continue to remain soft as investors would focus on ready or near ready assets.

    • Experiential leisure travel: Experiential leisure travel particularly in the luxury space could see more impetus as domestic HNI travellers continue to take short breaks round the year.

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