Despite domestic tourism registering a definitive growth in 2019, augmenting the Average Room Rate (ARR) and Rev Par for the hotel industry this year, the numbers have not been as strong as they were expected to be. There are a host of factors that could have attributed to this scenario, including geo-political, macro-economic factors, and weakening of the currency. The truth is that the growth has been shy of the industry’s anticipation. Will 2020 bring in redemption?
Excerpts from the conversation about how 2019 treated the hospitality industry and what trends we can expect to emerge in 2020 with Mr. Simarjeet Singh, General Manager, The Chancery Pavilion, Mr. SrijanWadhera, General Manager, Conrad Bengaluru, Mr.Vineet Verma, CEO & Executive Director of Brigade Hospitality Services Limited, Ms. Rachel Ravi, Managing Director, Red Earth Group of Resorts and Mr. SaharshVadhera, Director of Sales and Marketing, Shangri-La Hotel, Bangalore,
According to you, how did the hospitality industry perform in 2019? Which were the segments that contributed highly during 2019?
Simarjeet Singh: The hospitality industry in India performed better in 2019 compared to the last few years. Rising disposable income with the middle class, growing air connectivity and improved road infrastructure, rapid growth in domestic tourism, and favourable policy initiatives have pushed the occupancy, ARR, and Rev Par this year.
However, the numbers are not as robust as they were expected to be despite the government getting a clear mandate. The slowdown of the economy, geopolitical macro-economic factors, weakening of the currency, and shutting down of Jet Airways are some of the factors responsible for the slower than anticipated growth.
While each region or sub-regions will have different segments that contribute significantly. The overall consumption of hotel rooms by the domestic mid-market segment has seen a steady increase. The leisure travellers have become a significant segment leading to the growth of the travel market. This is being driven by the growth of the middle-income group, improving infrastructure, the growing economy, mobile and internet penetration, and regional connectivity.
This segment is looking to holiday frequently and seeking a quality accommodation at value rates. Hospitality chains are fast grabbing the market share in this segment. One of the key factors for higher demand is the growth of the corporate sector and the increased mobility of the workforce.
SrijanWadhera: The industry certainly is cautious owing to the global political environment. The Bangalore market is driven by business travel and has remained largely resilient considering the scale of operations of most MNCs. While occupancies have remained flat or exhibited marginal growths in the last two to three years, the ADRs have shown a YoYo growth despite significant hotel inventory addition.
There has also been a steady growth in the Groups and Meetings segment. Multiple hotel venues with large meeting spaces have opened in the city over the last two to three years. This also is driven by the positive upcycle most organisations have been exhibiting over the last 24+ months. There has been a significant number of medical events/conferences in the city over the last three years.
Vineet Verma: The performance in 2019 was certainly better than the previous year. ARR and occupancies were particularly in certain micro-markets that witnessed increased traffic. It was the business segment that saw a noticeable improvement.
Rachel Ravi: Tourism has been struggling with demonetisation, natural calamities, and global slowdown. However, the hospitality industry stood together to brave the cyclic low. Tourism forums and groups headed by veteran personnel encouraged the industry with positive advice. Women in this industry have become a force of their own and there are many women tourism-related groups supporting and sharing business.
Saharsh Vadhera: 2019 was a buoyant year for hospitality in general. Bangalore received more arrivals and more conferences than previous years fuelling aggressive growth for 5 Star and upscale hotels. Reports state an increase in both FIT’s as well as MICE business. Q1 and Q4 remained heavy due to conferences while Q2 and Q3 had a steady FIT business.
What were the trends that showed promise and most talked about during the year?
Social Media: Thanks to increased social networking among customers and the influence of social sites, it has become imperative for hotels to embrace social media. Hospitality brands are defining their online personality for improved brand engagement. Hotels need memorable, branded content to tell a story with efficiency and impact. Hotels are continually focusing on publishing relevant content and distinguishing themselves from their competitors. They have dedicated teams to monitor social comments on a daily basis and ensure prompt response to customer issues and feedback.
Simarjeet Singh: The world is moving faster than ever, shifting social attitudes; new consumer requirements are reshaping the industry. The trends cited below are becoming increasingly relevant, talked about in current times, and are shaping guest experiences.
Experiential Travel: The rise of experiential travel is the biggest trend in the hospitality industry. Travellers are seeking authentic and meaningful experiences. They are looking to explore new places through the eyes of a local. Hotel restaurants are also embracing this search for authenticity, as more and more restaurants are offering, genuine, authentic, and interesting local dishes. Traditional recipes highlighting fresh and local produce and feature organic wholesome ingredients are what the travellers expect.
Tech Explosion: The hospitality business cannot ignore technology and it is a game-changer in today. From operations to guest experience, to marketing, smart hotel technology offers a variety of cost savings and revenue opportunities, and it is enabling hotel owners to reach new levels of profitability. The majority of guests today are self-sufficient, tech-savvy travellers who are comfortable using apps or mobile websites. Hotels need to make ensure their offerings are up-to-date and user-friendly. Keyless room entry systems to smart TVs, voice-activated devices to open curtains, adjusting room temperature, turning the TV, dim the lights, etc are various ways in which technology is enhancing guest experiences.
Sustainability: Customers are increasingly concerned with environmental issues and want to know that the businesses they deal with are behaving ethically. For this reason, sustainability has been one of the most noticeable hospitality trends of recent times, with a growing number of hospitality businesses promoting eco-friendliness. Examples of this range from restaurants promoting their vegetarian and vegan options, to hotels that make use of smart light bulbs and smart heating to save energy.
Millennials: Millennials are a formidable social and economic force. They desire experiences over things and travel and adventure are priorities for them. Their consumption preferences will continue to define much of the travel industry’s services and products in the future. Companies are defining their strategies based on this demographic group’s personality traits and habits. They travel often, are early adopters of technology, like personalised interactions and are spontaneous. Food remains a strong driver when they travel.
Srijan Wadhera: Technology is making its way into the industry. Features like digital check-ins available in the Hilton Honors app allow for conveniences controlled by a phone. These include selecting a room of your choice pre-arrival, minimal human intervention allowing for express check-in, and complete access to all areas in the hotel. This optimises time utility for those on business and often travels with a purpose. Taking this a notch further, the Hilton connected room is a first-of-its-kind, high-tech guest room that enables guests to personalise and control every aspect of their stay from one central point – their mobile device.
Another trending topic was sustainability. A couple of months ago, Hilton has been named the global industry leader in sustainability on the Dow Jones Sustainability Indices (DJSI), the most prestigious ranking for corporate responsibility and sustainability performance. This recognition marks Hilton’s third consecutive year on the DJSI.
Vineet Verma: The entire sector witnessed an increased awareness towards sustainability with a specific focus on reducing carbon footprint and doing away with single-use plastics. Several measures in this direction were taken up during the year and despite initial challenges, we can look forward to this initiative being adopted by all players in the industry. Another major thrust was to encourage online bookings through their own websites rather than through OTAs.
Rachel Ravi: Travellers are looking for unexplored, offbeat, personalized, and, tailor-made holidays. Boutique properties are of interest now while the 5 stars are for a certain segment that looks for luxury alone. The remaining segment is what I call the aesthetic traveler, one with high promise. His taste is eclectic, from music to food. Intellectual stimulation through interesting conversations and experiences is what he is looking for.
SaharshVadhera: Average daily rate remained the focus for city hotels that were able to cash in on more arrivals in certain months. This year has also shown an increase in food and beverage consumption in the luxury segment.
Please throw light on what can we expect in 2020 in terms of trends to watch out for and upcoming segments that will shape the industry.
Simarjeet Singh: India is a large market for travel and tourism offering a diverse portfolio of niche tourism products. During the last few years, the industry was facing challenges due to oversupply and a slowdown in demand due to macro issues. While the current demand-supply equation has been favouring growth across most of the markets, the growth has been modest.
In his Independence Day speech Mr. Narendra Modi, Prime Minister urged people to visit 15 domestic tourist destinations in the country to promote tourism. The government has also released a medical visa to encourage medical tourism in the country. The government has also been making efforts to boost investments in the tourism sector. The Ministry of Tourism is also developing several theme-based tourist circuits of Swadesh Darshan Scheme to promote tourism.
The GST rate rationalisation for hotels by GST Council is an extremely positive recent development. With the government’s continued efforts to revive the economy and promote travel and tourism, the industry is expecting a better performance in 2020. It is expected to witness a gradual and sustainable rise in room rates backed with strong occupancies over the next few years.
Going forward, a weaker currency, coupled with an expanding middle-income population and the rising purchasing power of the domestic traveller, will continue to provide an opportunity for a greater number of Indians to travel domestically. In 2020 we will see the best ever performance of the sector riding on the back of a stable government and an improved economy.
Srijan Wadhera: While most organisations are taking a cautious approach owing to recent volatility on both the economic and political front, I am a firm believer that our industry will continue to grow. Most metro markets are still hovering between 65% and 70% occupancies and there certainly is headroom for growth on occupancies and ADRs. As long as new investments continue to flourish there will always be a strong demand for hotels. The hospitality industry is focused on creating indigenous yet efficient experiences. The entire industry is looking at reimagining sustainable business practices.
Vineet Verma: We expect to see the growing adoption of several innovative green initiatives, with a specific focus on Zero plastic, reduction in Carbon footprint, reduced wastage of food, and so on. We also see more and more operators adding an ‘experiential’ touch with flavours of ‘local culture and traditions’. Customer experience and convenience are high on the agenda.
Rachel Ravi: 2020 will see Karnataka open up. The state has everything, from mountains, beaches, wildlife, wellness, and most importantly its people who are gentle and genuinely hospitable. Every segment has a market in Tourism. Provided the product is good and has value for the money spent. The field is now open to innovative and unique experiences.
Saharsh Vadhera: 2020 is going to be the year of millennials where value propositions will be rewarded with instant success. Brand loyalty will be redefined and will be based on convenience. The year may not be thick with MICE events but will definitely see aggressive growth in occupancies and ADR fuelled through a corporate FIT.