Hilton Gears Up for Massive Expansion in India, Targets 75 Hotels in 3-4 Years

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Hilton Gears Up for Massive Expansion in India, Targets 75 Hotels in 3-4 Years
02 Apr 2024
5 min read

News Synopsis

The US hospitality giant, Hilton, is setting its sights on significant growth in India. The company aims to triple its current portfolio by adding 49 new hotels in the next 3-4 years. This ambitious expansion plan will see Hilton's presence surge from 26 operational hotels to a whopping 75. With an additional 20 hotels already signed and under development, Hilton is well on its way to achieving this target.

Key Strategies for Growth: Targeting Emerging Markets and Strengthening Brand Portfolio

Hilton's growth strategy is multifaceted. The company is not only focusing on major metros but also venturing into emerging markets with high potential. Ayodhya, a pilgrimage town witnessing a surge in tourist inflow due to the newly consecrated Ram temple, is a prime example.

Similarly, Haridwar and Rishikesh, popular religious destinations, are also on Hilton's radar. Additionally, tier II to V cities with developing infrastructure and rising travel demand present exciting opportunities for expansion.

Hilton also plans to expand its brand portfolio in India. Currently, the company operates five brands, including DoubleTree and Hilton Garden Inn. This is expected to increase to seven, with the introduction of the luxurious Waldorf Astoria brand.

Catering to the Booming Wedding Market and Domestic Tourism

The Indian wedding industry, valued at a staggering $75 billion and growing at a steady 7-8% annually, presents a lucrative opportunity for Hilton. The company plans to capitalize on this trend by introducing luxury brands like Waldorf Astoria and Conrad in tier-I cities, specifically catering to lavish wedding celebrations.

Recognizing the strength of domestic tourism, which contributes to 85% of India's hospitality sector, Hilton aims to tap into this vast market segment.

Food & Beverage and MICE Segments: Key Revenue Drivers

Hilton acknowledges the significant role of the food and beverage (F&B) segment, contributing nearly 45% of hotel revenue. A substantial portion of this revenue comes from weddings and the MICE (meetings, incentives, conferences, and exhibitions) segment. The growing emphasis on extravagant weddings in India is expected to benefit Hilton significantly. Moreover, the company recognizes the potential of the F&B market in tier II and III cities, aiming to capture this rising demand.

Bright Outlook for Indian Hospitality Sector

According to CareEdge Ratings, a credit rating firm, the Indian hospitality sector is poised for steady growth over the next 4-5 years. The industry is expected to witness a 4-5% compounded annual growth rate, with over 50,000 new rooms being added to the existing inventory of approximately 160,000 branded rooms. This growth will be driven by a shift in focus towards upscale, upper midscale, and midscale/economy segments, catering to a broader range of travelers.

The pan-India average room rate is also expected to rise due to the demand-supply gap, reaching Rs 7,700-7,900 in FY25 from Rs 7,200-7,400 in FY24. Similarly, the hospitality sector's RevPAR (revenue per available room) is estimated to climb to Rs 4,800-5,000 by the end of FY24, with a projected growth of 9-11% in FY25. Occupancy rates are expected to remain stable at around 68-70% in FY25.

Market Trends and Growth Projections of Indian hospitality sector:

According to industry experts, the Indian hospitality sector is poised for steady growth, with an estimated 4 to 5 percent compounded annual growth rate over the next few years. The addition of over 50,000 rooms to the existing inventory reflects the sector's expansion trajectory.

The evolving supply-demand dynamics are expected to impact key metrics such as average room rates (ARR) and revenue per available room (RevPAR), with anticipated growth in FY25. These trends underscore the favorable market conditions driving Hilton's expansion initiatives in India.

Conclusion:

Hilton's accelerated expansion in India, coupled with its strategic focus on emerging markets and luxury segments, underscores the company's commitment to meeting evolving consumer demands. As India's hospitality sector continues to thrive, Hilton aims to carve a significant presence, offering unparalleled experiences to travelers across diverse markets.