How do you view the domestic hospitality industry’s growth over the next few years?
The outlook for India’s hospitality industry over the next few years remains structurally positive. Growth is being driven primarily by strong domestic travel demand, which has emerged as the sector’s most stable anchor post-pandemic. Religious tourism, weddings, healthcare tourism, as well as business travel, are now ensuring occupancies in the industry not just in the peak seasons but in the majority of the months. Additionally, the MICE segment has been seeing a steady stream of inbound tourists, thereby resulting in additional positives. The significant aspect here has been that the industry’s expansion has been restricted to the metros and the holiday destinations in the past. Now, it is being observed that the trend has shifted, with the industry now expanding in the religious tourism routes, the emerging business destinations, and even smaller towns.
What key trends are shaping the hospitality industry right now?
The industry sector is being driven by four defining trends: asset-light growth, the emergence of mid-scale & experience-based hotels, the acceleration of technology and a greater focus on sustainability. Management contracts or ‘asset-light’ strategies are allowing hotel companies to expand their brands without increasing their balance sheets. On the other hand, the demand is gradually tilting towards mid-scale hotels, as customers now look for value, experience and flexibility in addition to ‘luxury’.
Technology is being used as a primary enabler to enhance the operational efficiency of hotels, with digital check-in, touchless experiences and data-driven yield management becoming the new universal preferences. Sustainability, too, is being accepted as a ‘heat, not a heartbeat’, as a result of evolving consumer attitudes as well as stricter regulations. All these trends have the potential to make the hotel sector a ‘more resilient, scalable and globally connected sector if supported with the right policy framework.
What opportunities do you see for the sector in Tier II and III cities?
Tier II and III cities will be the next hotspots for growth of the Indian hospitality industry. The sector benefits from improvements made in road, rail, and air infrastructure, as well as their proximity to tourism related to spirituality, culture, medicine, and regional tourism. Further, the cost of development remains low in Tier II & III cities, and now there is a shift towards non-seasonal tourism. To tap this effectively, there must be state and local facilitation through proper local taxation, industry status, infrastructure and timely approvals. The growth of tourism in these regions will not only provide employment but will also enable more even growth across the country. FHRAI has actively been recommending such policies for harmonised growth across non-metropolitan cities.
What kind of policy support does the industry need to maintain steady growth?
The most critical requirement for sustained growth is a predictable and investment-friendly policy environment. Granting infrastructure status to the hospitality sector remains a long-pending reform that would significantly lower borrowing costs and improve access to long-term finance. Rationalisation of GST, restoration of input tax credit and clarity in tax interpretation are equally important to improve project viability. Simplifying licensing through single-window clearances and reducing multi-agency compliance will further boost investor confidence. FHRAI plays a proactive role by regularly working with the Central and state governments, providing data-backed inputs and advocating solutions that align industry needs with national economic priorities. Our approach is collaborative and focused on long-term sectoral health.
How is the industry dealing with rising operational costs, including taxes and compliance requirements?
Rising operational costs continue to be a major challenge for the hospitality industry, particularly for small and mid-sized properties. The combination of high energy prices, the urgency of giving higher wages, and the unavailability of input tax credit under GST has greatly limited operating margins.Besides, compliance requirements are not only costly but also time-consuming. Here , hotels are turning their attention to upgrading their operational efficiency. A lot of them are going for technology to cut down on wastage, power and staff optimisation and so on. Additionally, operators are re-negotiating the supply contracts and becoming sharper in their revenue management.