Despite the challenging economy, the domestic hotel industry is likely to show some recovery over the next few years. The demand for rooms remains robust in gateway cities and leisure destinations, but hotels in more business-oriented areas will take a bit longer to recover. Moreover, the recovery of the midscale segment is slower than expected, as business travel has remained weak and the demand for midscale hotels is constrained by cost inflation.
The recovery of demand is being led by weddings and MICE travel. Although demand for hotels in India is gradually regaining, the domestic hotel industry is still at a significant discount to its peak. In FY23, the domestic hotel industry is expected to return to its pre-Covid levels. However, this is far from a guarantee that hotels will achieve profitability.
As China’s population continues to rise, the country’s hotel industry is growing rapidly. This rapid growth brings with it social, cultural, and economic issues. Although domestic hotels benefit from this boom, they are facing stiff competition from international brands and local hotel chains. Because of the booming middle class and growing demand for high-quality service, international brands are interested in entering the Chinese market. Moreover, the quality of hotel rooms is declining rapidly, and foreign brands are expanding rapidly.
The domestic hotel industry is largely driven by domestic resort and leisure markets. The increased drive-to-leisure demand has fueled growth in these sectors. In addition, two years of lockdowns have contributed to pent-up demand. Uncertain expectations about traveling abroad and the new norm of remote working have also helped domestic resorts.
Domestic tourism will continue to be the lifeline of the industry. The next few years will be critical for the domestic hotel industry. The 2020 Coronavirus pandemic is expected to impact large-scale travel and hotels will depend on domestic tourism to recover. As a result, domestic travel will be the main source of revenue for most hotel chains. Further, 73% of global respondents expect to travel within the next year, and they expect to travel domestically first.
In the aftermath of 9/11, many hotels experienced heavy losses. However, the upscale segment recovered quickly from the crisis. In addition, independent hotels had fewer repercussions than other categories. Economy hotels, meanwhile, took longer to recover. Despite the hiccups, the government supported the domestic hotel industry and allowed operations to continue.
As the world becomes more digital, so do the opportunities for the domestic hotel industry. Social media and mobile marketing are increasing in popularity, and hotels must employ staff to manage these channels. These platforms can be used to offer special promotions and discounts to their followers. Moreover, meeting planners are increasingly embracing social networking to stay connected and informed.
Despite these challenges, the industry remains resilient and adaptable. The changes have slowed the growth of the hotel industry, with many CEOs voicing lowered confidence in the revenue prospects in the coming years. This means that hotel operators must innovate and adopt new ways of operating.