Entry of luxury hotels in India to remain tight due to barriers: Report

New Delhi [India], September 28 (ANI): The supply of luxury hotels in India is expected to remain constrained due to several high barriers to entry, including limited land availability, extensive regulation, restrictive zoning, high capital costs, and long gestation periods.

According to a sectoral report on the luxury hotel segment by JM Financial, these challenges continue to restrict new developments in the luxury hospitality segment.

"Supply in the luxury segment is expected to remain constrained due to high barriers to entry, including limited availability of land, extensive regulation, restrictive zoning, high cost of capital and long gestation periods," the report added.

The report noted that, despite supply constraints, demand for luxury hotel rooms is growing rapidly.

Rising disposable incomes and a shift in consumer preference towards premium experiences have driven strong growth in Average Daily Rates (ADR) and occupancy levels.

The luxury hospitality segment recorded an ADR growth of 5.7 per cent CAGR over Financial Year (FY) 2014-24, outpacing the broader hospitality industry's growth of 3.1 per cent CAGR, according to HVS ANAROCK Research.

Looking ahead, total demand for luxury rooms is projected to grow at a CAGR of 10.6 per cent between FY24 and FY28E, while supply of luxury hotel rooms is expected to increase by only 5.9 per cent during the same period. This imbalance is likely to boost the segment's Revenue Per Available Room (RevPAR), which is forecasted to reach approximately 1.5 times the FY24 levels by FY28E.

Highlighting the India opportunity, the report noted that the country's rapid economic growth is expected to create an exponential rise in the number of high- and upper-middle-income households, reaching 200 million by 2030, approximately three times the 69 million in 2018.

India is one of the fastest-growing major economies in the world, with its GDP projected to nearly double to USD 6.8 trillion by 2030, from USD 3.6 trillion in 2023, according to the report.

India is entering a phase of economic development comparable to that of the United States and Western Europe in the 1980s, the report added.

Furthermore, the report cited the Kearney observation and noted that the luxury market in India is expected to grow at a CAGR of 9.2 per cent from CY23 to CY28E, significantly outpacing global averages. (ANI)

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