As COVID restrictions ease, Indian Hospitality is likely to come out ahead of the field: with pent up levels of demand, world class technology and a burgeoning, increasingly wealthy domestic market set to see the subcontinent outstrip China and Singapore. So where would you put your money?
The Virginia Military Institute has a famous question for its Officer Cadets: in the heat of battle the centre of your line is failing, but the flanks are holding, where do you send reinforcements? The answer (in case you were wondering) is the flanks: those doing well do better with added resources, those doing badly will still struggle and resources are wasted. Economists like to quote that example, because it tells us a lot about the way modern economies work in a crisis: and as we slowly emerge from the shocks of the Pandemic, it’s a lesson we would all do well to remember at the moment.
It has particular relevance for the Hospitality Sector, so let's extend the analogy to real life…
It's a striking fact that Delhi NCR has nine times fewer hotel rooms than Beijing, and a quarter of Singapore’s capacity: in Bangalore 4,100 hospitality units were added between 2015 and 2019, compared with 14,300 in Singapore over the same period. But before COVID lockdowns were imposed, occupancy rates in Mumbai had soared to 79%, compared with 61% in Manila and 70% in Shanghai. The lesson is plain: fewer units in India were (and are) generating greater returns as against a much larger, absolute number elsewhere across Asia. Beijing, Singapore and Shanghai are the equivalent of the battle’s failing centre, so (as any young VMI Cadet will tell you), additional resources should be directed to India, because that’s where returns will be maximised.
And those lower (absolute) figures we mentioned are also a vital clue to what the future holds for hospitality generally, because a lower asset base means more potential for growth.
More than any other hospitality sector on the planet, India has the greatest potential for growth: much more than any comparable Asian centre (including Beijing and Singapore), and way more than the heavily saturated western market. Take, for example, the key ratio of hotel reservations to air passenger numbers: for every million air passengers arriving in Bangalore there were 768 hotel reservations in 2019; the equivalent was 431 for every million arriving in Delhi NCR. And that contrasts starkly with 2,502 per million air passengers arriving in Beijing in the same period: 1,452 in Bangkok.
This reflects an enormous untapped potential for Indian Hospitality: buttressed by a series of initiatives from Prime Minister Modi’s Government, such as the relaxation of FSI protocols, introduction of faster permission systems for new developments and across the board funding incentives. All of it carefully calibrated to meet the needs of the fastest growing population on earth: increasingly middle class, increasingly hungry for service innovation and set to outstrip China in sheer numbers within the next two years.
After all, business and recreational travel isn’t only an international phenomenon…It pays to have a ready made, turbo charged market on your doorstep.
As reported by McKinsey last year (www.mckinsey.com), post COVID hospitality will need to meet the particular safety needs of travellers too: setting a new standard of personal safety and safety messaging through increased provision for online payments, online check ins and catering systems focused on remote ordering and inventory management structures. The more consumers feel safe to travel and secure when they stay, the quicker the post COVID bounce back will happen.
India has an inbuilt advantage on that front too, with one of the fastest growing and most advanced technology centres in the world: think Bangalore and Chennai again…
And finally, sustainability is a central part of the process: especially with the new Biden Administration signing the US up to the Paris Climate Accords again, after four years of Trump induced myopia. Governments across the world are taking more progressive steps to reduce carbon emissions, so hospitality chains on the subcontinent, such as India’s Eco Hotels (www.redribbon.co) can look to benefit from added government investment and incentives designed to support sustainable business platforms.
So, in the light of all that, where would you add the reinforcements and reserves…do we really need to ask?
DISCLAIMER: The views expressed are solely of the author and ETHospitalityWorld.com does not necessarily subscribe to it. ETHospitalityWorld.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.
Article also published in the Economic Times.