The Indian hotel industry is expected to see an increase in transactions, driven by factors such as debt pressure and favorable macroeconomic conditions. Real estate services company JLL estimates that by the end of the year, hotel transactions in India will reach $413 million, an increase from the $401 million invested last year. The surge in investor interest is attributed to expanding commercial markets, improved air connectivity, and a strong tourism rebound in the Asia Pacific region.
For the second half of the year, JLL predicts that Tier-1 markets will continue to dominate transaction activity, accounting for 78% of the expected volume, with Tier-2 and 3 cities making up the remaining 22%. While established markets like Japan and China will remain top markets for hotel transactions, emerging markets like India and Thailand are expected to experience significant growth. CBRE had previously forecasted that investments in the Indian hotel industry could surpass $2.3 billion in the coming years.
Despite the positive outlook, JLL notes that a significant portion of the expected transactions in 2023 are driven by debt pressure, with deals accounting for 36% of the volume currently under proceedings of India’s company law tribunal or conducted to alleviate debt burdens. As the central government’s incentive scheme to ease post-Covid debt pressures comes to an end and interest rates stabilize, owners may feel pressure to liquidate assets, leading to more hotel transactions and potential exits by smaller players.
During the first half of the year, there was a significant increase in the number of new branded hotel keys signed, with Tier-2 and 3 cities accounting for 83% of the signings. Although asset transactions were mainly concentrated in Tier-1 regions, hotel signings were more prevalent in Tier-2 and 3 cities, pointing to growing opportunities in these markets. In Tier-1 cities like Mumbai, Hyderabad, Pune, and Chennai, there is high domestic demand driving the signing of hotels with more than 250 keys.
Key highlights of hotel transactions in 2024 include listed hotel companies accounting for 44% of the volume, with 72% of transactions involving operational hotels rather than greenfield projects. The upscale hotel segment saw the highest transaction volume, followed by the midscale segment. With Tier-1 markets expected to continue being a stronghold for transaction activity, the Indian hotel industry is likely to see more investments driven by debt pressures and the willingness of larger profitable players to increase their investments.
