HVS Musings: The Rise Of The Upscale Hotels Segment In India
By Mandeep S Lamba, MRICS, President (South Asia), New Delhi and Dipti Mohan, Senior Manager - Research, New Delhi
The midscale and upscale hotel segments have been driving the growth in the branded Indian hotels sector in the last few years and are the sweet spots for upcoming development in the country. The upscale segment, in fact, has regained the mindshare of hoteliers in the last couple of years due to the significant demand in this segment. As a result, upscale properties accounted for 31% of the total signings by properties in 2020 compared to 15% in 2018, while their share in signings by keys has increased from 27% in 2018 to 37% in 2020.
The other key demand driver has been the 'big fat Indian wedding' segment, which have become highly personalized and intimate in the post-COVID world. Upscale properties and resorts have been cashing-in on the increasing demand for 'destination wedding' and related social events which are now being hosted at domestic locations instead of international locations due to the COVID-related travel restrictions.
With changing demand dynamics, hoteliers are once again focusing on the upscale segment, especially while increasing their footprint in the leisure segment. Developing an upscale property instead of midscale at leisure destinations is a more attractive investment proposition as the land cost for both remains the same, but the upscale property can demand a higher ADR. Moreover, an upscale property allows the hotel owner to capture higher paying guests as well as cater to demand emanating for associated facilities such as F&B outlets and banqueting, particularly during the off-season. Additionally, upscale resorts have successfully captured the growing demand for wellness tourism in the country in the recent past. In the post COVID world, an increasing number of people are likely to seek personalized and exclusive wellness experiences, especially when inbound travel resumes to its full glory.
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