Key Takeaways from HICSA 2024

The India Story

The Indian GDP is rapidly growing at 6-8% and is forecasted to sustain this trend. As interest rates and exchange rates are projected to moderate, it should provide additional momentum to the Indian economy. Over the last decade, the global emerging middle class expanded by 1 billion, with India contributing 25% to this growth. In the next 20 years, another 1.3 billion individuals are expected to join the middle class globally, with India anticipated to account for a third of this increase.

Notably, there is a rise in disposable income and an increase in the number of affluent individuals, which is anticipated to positively impact the travel and tourism industry especially in the leisure segments. Demand in India has consistently exceeded supply, a trend projected to continue. This underscores the urgent requirement for increased supply in India to meet the growing demand.

The growth in the travel and tourism industry is primarily supported by the infrastructure development which has enhanced connectivity and unlocked the potential for hospitality ventures in previously unknown destinations. There is a notable shift towards exploring unconventional leisure markets, particularly in Tier II and Tier III cities. Destinations like Lonavala, Puducherry, and Ooty are witnessing increasing demand.

Focus on Food & Beverage

Hotel companies must shift their perspective on F&B, giving it equal priority alongside rooms to enhance departmental profitability.

Restaurant operating models within hotels are not a One-Size-Fits-All. Depending on the location, concept and level of involvement required, contract terms vary widely. Control in hiring and training of staff is an essential requirement for restaurants. Outsourcing and/or centralised operations can offer a welcome respite from the operational and cost inefficiencies currently existing in the hotels.

The formulaic concepts across hotels are losing out to independent restaurants with a focus on innovation. F&B concepts need to be re-engineered via strategic partnerships to match the local culture and demand.

The Indian F&B industry is on the brink of significant growth. However, rather than attempting to mimic success stories from other countries, it is crucial for establishments in India to reflect the cultural essence of the nation.

Establishing unique branding and gaining recognition for the restaurant can significantly boost a hotel’s profitability, creating a halo effect on other outlets and overall facilities.

The Owners’ Opinion

The Owners’ Opinion was in the spotlight at the Owners’ Only Workshop on Day 1 of HICSA 2024. A wide variety of owners’ concerns were discussed including – Brand Standards, F&B Profitability, Incentive Fees, Opacity in Operators’ Fees, Performance Tests, Brand Technical Services, Need for a Hotel Owners’ Association, and the Talent Crunch. Take an in depth look at the insights from the Owners’ Only Workshop here.

Technology

While technology can’t fully substitute for human interaction, it should serve to streamline operations and enhance guest experiences. By integrating technology, hotel companies can improve sustainability without exorbitant costs. In the long term, investing in technology promises to boost operational efficiencies for businesses.

“Data is the New Oil” – utilising data for personalisation is the direction to pursue. The customer journey commences with digital interactions with services, and data should be leveraged from this point onward to tailor and enhance the customer experience.

While the necessary technology is available, there’s a prevailing resistance against adoption that needs to be overcome. India is a market known for its aggressive adoption of technology, yet this trend is slower and less pronounced in Tier II and Tier III cities. Encouraging greater tech adoption in these areas could fuel market growth.

The next major innovation sought in the industry is technology that enables a seamless travel experience and customer journey without compromising service quality. Achieving a seamless traveller experience is crucial, and collaboration with the government on data is vital. Initiatives like Digiyatra pave the way for integrating technology into hospitality.

Resurgence of Luxury

In the past, the Indian luxury hospitality market has fallen behind, with ADRs encountering a cap of US$350, in contrast to more developed markets. However, following the economic downturn, the leisure and luxury sectors have been quick to recover. This pattern is also evident in the current Indian hospitality market.

As traveller preferences shift, luxury is experiencing a notable resurgence, with luxury rates increasing by over 85%. This growth in luxury rates surpasses that of upper midmarket and midmarket rates. Among Indian travellers, thematic luxury travel, particularly those centred around relaxation, wellness, and spirituality are gaining popularity. With disposable incomes increasing and consumer behaviours evolving, there is expected growth in leisure travel within the luxury segments.

India is entering an era of personalised luxury. Smaller, boutique luxury hotels are becoming increasingly appealing to today’s travellers and yielding greater returns. The key lies in tailoring luxury experiences to individual guests. Venturing into ultra-luxury accommodations in emerging destinations holds promise for the future.

Franchising as the Way Forward

Asset Light is the way forward with a larger focus on franchising especially for targeting growth in Tier II and Tier III cities with midmarket to upper midmarket aspirational brands.

In India, especially in the budget to midmarket and upper midmarket space, brands are also willing to franchise to first-time owners and provide the essential support needed for them to navigate the industry.

There will be a dire need for asset managers in this model as first-time owners venture into the industry with franchising to represent the interest of owners and oversee the operations.

Third-Party Operators are poised to play a key role in India’s hospitality industry going forward as they possess the local expertise wanted by the owners and can better understand the market than international brands. Additionally, the teams in third-party operating companies have experience across asset classes and brands.

Talent Troubles

Today’s workforce, composed of the younger generation, seeks clear career paths tailored to their aspirations. Some tools suggested for talent attraction and retention are mentioned below:

• Offering differentiated compensation and structured career development plans are essential tools for retaining talent.
• Investing in training and development programs serves as another effective strategy for talent retention.
• Emotional engagement among employees fosters satisfaction and fulfilment through human interaction and support.
• Accelerator programs serve as motivational tools for both recruiting and retaining talent.

Many professionals are transitioning from the hospitality sector to parallel industries like FMCG because of the industry’s poor work-life balance and inadequate compensation, despite demanding long hours. These short comings make the industry less attractive when compared to other, more lucrative offers for B-school and even hospitality school graduates.

The recruitment across different hotel tiers needs to differ. Hotels in the budget to the upper midmarket tiers should recruit staff with lower educational qualifications and invest in their training to make them functionally literate rather than spending on hiring from B-school and higher qualifications.

HICSA 2024 recorded a milestone attendance of over 720 industry professionals and served as a platform for crucial discourse on the South Asian hospitality industry. As we eagerly anticipate the upcoming THINC Indonesia, on 6 and 7 August 2024 in Bali, our focus shifts towards exploring the hospitality industry within the context of Southeast Asia.