Hospitality growth story in India to remain strong: Marriott’s Rajeev Menon

2023 in some ways was a record year for the hospitality sector. But 2024 could see some rationalization, consultants say. Do you agree?

Asia Pacific had a particularly strong year across the industry. In our case, we almost broke every record that there was. There are shifts that are playing out in Asia because almost 50% of the world’s population lives here. When we think about what’s going on with the economic activity in India and supply chains shifting out of China, we see the demographic advantage for countries like ours and others in the region. It’s clear that the demand growth is really strong in Asia Pacific. In the past, many countries in Asia were reliant on tourism coming in from other parts of the world. Just last year, over 60% of our business came from either domestic or intra region. So that demonstrates that the region itself is starting to become self reliant.

Last year you’d told Mint in an interview that India became a ₹8,000 crore gross margin business for you. Has that changed in any way?

We crossed over ₹9,000 crore in turnover at the end of the last calendar year. This year has started strong. The company has a portfolio of 160 operating properties across 17 brands and will look to open 14 hotels this year in South Asia. So we are definitely seeing a double-digit improvement over last year. I don’t see the trend shifting dramatically now. There is obviously a little bit of normalisation from 2023 but still higher when we think about what went on in the covid years of 2020-2022. If we are still able to drive double-digit growth, that is truly representative of the strength of the economy, the brand, our loyalty programme and so on.

Travellers were unhappy with the skyrocketing prices hotels charged in 2023. Do you expect price rationalization in 2024?

As more and more competition comes, we will see some level of rationalization. But India, for much of the past was under-positioned in its pricing when compared to other parts of the world. But in the long run, as the economy grows, the price positioning will reflect the high-end product and the service that customers are getting.

Is that true for India as well?

India is transitioning from being the fifth largest economy to the third largest economy, which is obviously going to drive a lot of growth. Right now in India, it’s predominantly a domestic travel driven story because international travel has really not come back to 2019 levels yet. But Asia Pacific will have a decade-long growth story for hospitality, especially given the demographic advantage.

On the flip side, the hospitality industry has been asking for infrastructure status for over a decade now. But it has not yet received it from the government. Why do you think that is?

Yes, if we get infrastructure status, it will help in many different ways. But that’s just one aspect of the whole hospitality business. Where that impacts is that India is one of the few markets where to make a hotel, owners can take a 15-year loan. But the interest rates generally tend to be higher if you don’t have infrastructure status and they can end up paying 11-12% interest rates. But this has improved from a few years ago when they could only take a ten-year loan and were paying 14-15%. But the infrastructure spending the government is doing on roads, airports, ports, etc., is improving accessibility, and that is a game changer for the industry. They are making destinations more accessible and that is what is driving the growth.

In what direction is the sector heading in 2024?

I doubt that in the next five years or so we will see a down cycle. Now, again, many things can happen, but the investment the government is making, the economic growth, are all driven domestically to a great degree. What the Indian government is doing with infrastructure spending, is similar to what we had seen 25-30 years ago in China or 50 years ago, say, in the US, There is now improved accessibility, new airports and roads and all that kind of stuff, and people tend to move around these developments. Indians are aspirational about travel, so they are definitely getting out and travelling as a result. When you look at our hotel management contract signings for last year, they were well north of 70%. I think about 77% of our signings were in the luxury or premium space. We had a lot of hotels that we signed, particularly in leisure destinations. The shift towards luxury and premium is driven by resorts and also by the confidence in the investor community. This industry is really strong today and is going to remain this way for decades to come. Any investment in hotels is done for decades, if not hundreds of years.

Parts of the western world have slowed down economically and that has impacted travel. Could that happen in Asia, too?

What we are seeing for the first time is stable governance and a government that’s very committed to infrastructure spending. When we have this kind of tailwind behind us, even if parts of the western world like the UK slow down or even Japan which has sort of gone into a recession because they’ve recorded two quarters of negative growth. My view is that India may and will pretty much escape any of that negative recessionary conversation purely because of what it’s got going on from within.

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Published: 28 Feb 2024, 06:00 AM IST