India’s hospitality sector has witnessed USD 175 million investment activity in H1, 2023: JLL
Real estate developers and HNIs/other business owners comprise the largest shares (32% each) of hotel investment volume in H1 2023 The National Company Law Tribunal (NCLT) resolution cases are gaining traction with a focus on operational
- Real estate developers and HNIs/other business owners comprise the largest shares (32% each) of hotel investment volume in H1 2023
- The National Company Law Tribunal (NCLT) resolution cases are gaining traction with a focus on operational assets in key destinations
- 2022 witnessed a record number of hotel signings (19,860 keys) and openings (9,961 keys).
Delhi, 28th September 2023: The hospitality sector in India has witnessed a noteworthy resurgence in hotel investment activity, according to JLL’s latest report. In 2022, the sector saw a total deal volume of USD 73 million (INR 580 crore), representing a significant upswing compared to the previous two years, which were affected by the pandemic. This positive trend has continued into the first half of 2023, with hotel transaction volumes reaching USD 175 million (INR 1432 crore).
Unlike 2021, which saw mainly consolidations in the hotel transactions landscape, the year 2022 displayed a variety of transactions, encompassing single asset deals and lease agreements for land for greenfield airport-terminal hotels. .In the first half of 2023, there has been a notable increase in investment activity resulting from NCLT (National Company Law Tribunal) proceedings, especially involving high-value assets burdened with debt in strong performing markets like Mumbai and Bengaluru.
JLL foresees that the investment momentum in the hospitality sector will continue in the second half of 2023, with an anticipated volume of around USD 88 million (INR 722 crore), and extend into 2024. This optimistic outlook is founded on the outstanding performance of the hospitality industry, bolstered by strong macro-economic fundamentals, a thriving commercial market, and improved air connectivity.
Key highlights from report titled ‘Hotel Investment Trends – India H1 2023’ indicate several noteworthy trends in the Indian hotel investment landscape. High-net-worth individuals (HNIs) are increasingly diversifying their investment portfolios by entering the hotel asset class. Furthermore, portfolios and operating assets are attracting more investors compared to greenfield projects. There is a growing traction in NCLT resolution cases, particularly emphasizing operational assets in sought-after destinations. The conclusion of the ECLGS (Emergency Credit Line Guarantee Scheme) may lead to an increase in tradable assets that can be found in the market, creating fresh opportunities for investors Inbound institutional investment continues to gain momentum as well.
In 2022, a record number of hotel signings took place, with a total of 19,860 keys. While greenfield projects dominated the hotel signing landscape, brownfield projects witnessed a rising share, reaching 44% of the total rooms signed in 2021 and 32% of the same in 2022 as per the report.Throughout the pandemic, individual owners recognized the value of partnering with branded operators through franchise agreements to leverage their distribution and marketing strengths. Tier 1 cities experienced a gradual rise in the share of lease/revenue share agreements, as owners sought models with reduced risk exposure.
Additionally, 2022 witnessed a record number of hotel openings, totaling 9,961 keys. The midscale segment maintained the highest market share throughout the years, followed by the upscale, upper upscale, and luxury segments.
“We are encouraged by the strong recovery in hotel investment volumes and anticipate this positive momentum to continue in the coming years. The investment landscape remains attractive due to favorable macro-economic factors, an expanding commercial market, and improved air connectivity. As investors evaluate their options, we expect further diversification into the hotel asset class by HNI’s. We see increased interest from hotel investors for both operating assets and portfolios. The other rising trend is retail investor confidence in hotel stocks which is further encouraging privately held hotel owning companies to enter public markets ”Jaideep Dang, Managing Director, Hotels and Hospitality Group, India, JLL