Hotel investment trends in India

The H1 (January to June) 2024 witnessed six deals that translated into transaction volumes amounting to USD 93 million. In H1 2024, listed hotel companies led the list, accounting for 44% of the total transactions volume, followed by owner-operators (30%), and HNIs, family offices & private hotel owners (26%). The transactions ranged from operational hotels in tier 1 markets and leisure locations to land leases in airport district for greenfield development.

We expect H2 2024 to end on a strong note, with a forecasted volume totaling USD 413 million, a 22% y-o-y increase over total transaction volumes of 2023. The second half of the year has already begun with two transactions facilitated by JLL comprising of an operational hotel in Mumbai and a premium hotel land sale in Goa, at a total value of USD 70 million. In 2023, 36% of the total volume occurred either under NCLT proceedings or to pare down debt pressures. Moving forward hotel transactions may still be influenced by debt factors, as the Central Government’s incentive scheme on easing debt pressures post-COVID is coming to an end. This along with upwardly stable interest rates may put pressure on owners to liquidate assets.
 

Key highlights:

1. About 72% of the total transaction volume were related to operational hotels across tiers, 23% for under construction hotels, and the rest for land leases.
   
   
2. Investor preferences show that operating assets appear more attractive than greenfield projects.
   
   
3. The upscale segment held the highest share of the total transaction volume (44%), followed by the midscale (31%), luxury (23%), and the economy (3%) segments.
   
   
4. Listed hotel companies dominated in the first half of 2024, accounting for 44% of the total transactions volume, followed by owner-operators (30%), and HNIs, family offices & private hotel owners (26%).
   
   
5. Tier 1 markets remain a stronghold for transaction activity, accounting for 78% of the expected transaction volume for the rest of the year, followed by tier 2 & 3 cities with 22% of the transacted volume.

Hotel Signings

1. As of June 2024, branded hotel signings stood at 19,442 keys, accounting for 77% of the total number of keys signed in 2023.
   
   
2. 83% of the branded hotel signings in terms of the number of keys are concentrated in tier 2 & 3 cities.
   
   
3. Management contracts continue to hold the highest share of signings (89% of the total number of keys), while franchises and lease / revenue share agreements across tiers stood at 8% and 3% respectively.
   
   
4. The number of greenfield projects in H1 2024 (~13,700 keys) crossed the full year of 2023 (~13,600 keys), indicating the enduring confidence of hotel developers in the sector’s long-term growth.
   
   
5. Tier 1 markets such as Mumbai, Hyderabad, Pune, and Chennai saw signings of hotels with 250+ keys, signaling sustained interest in these hubs due to robust domestic demand and thriving commercial activity.

Hotel Openings

1. H1 2024 witnessed branded hotel openings of 6,071 keys, of which 85% of the number of keys opened were concentrated in tier 2 & 3 cities.
   
   
2. The midscale segment accounted for the highest share (46%), followed by upscale (29%), then upper upscale (12%), luxury (8%), and economy (5%) segments.