Market Snapshot: Kashmir Valley
Jammu & Kashmir stands as the most northern State and Union Territory in the country. Following India’s independence, the hospitality industry experienced significant growth in this area. Visitors would flock to witness the awe-inspiring snow-covered peaks and appreciate the diverse flora surrounding them. However, the perception of Jammu & Kashmir changed dramatically after the incidents of 1990, resulting in the loss of potential growth and development over the past three decades. The occurrence of insurgency, violence, and political unrest has discouraged both leisure tourists and corporate visitors. This article aims to present Hotelivate’s perspective on the Kashmir valley, drawing from primary and secondary research.
Kashmir was among the major beneficiaries of the ‘Revenge Tourism’ phenomenon witnessed during the COVID-19 pandemic. Droves of tourists flocked to the valleys and snow-capped mountains allowing hotels to record their highest-ever occupancies and average room rates. Despite the controversy surrounding the BJP government’s actions around Article 370, it has caused a relative calm in the region and driven confidence in the mind of tourists which has allowed tourism demand to flourish. At present, demand across the Kashmir valley remains robust with occupancies and ADRs continuing to remain at the same level as the previous fiscal.
The region, nonetheless, remains among the most militant in the world with numerous countries maintaining travel advisories and cautioning their population against visiting Kashmir. While we do expect some correction in the market’s performance going forward, a sustaining calm business environment and period of peace can continue to work with word-of-mouth marketing to reposition one of India’s most spectacular destinations and drive the region’s development.
Figure 1: Kashmir Valley Performance
(Combined performance of Branded Hotel Supply in Srinagar, Gulmarg, Pahalgam and Sonamarg)
Source: Hotelivate Research
Branded hotel supply in the region has developed gradually from less than 200 rooms in 2011/12 to over 850 rooms in 2022/23. In addition, hotel brands continue to display their confidence in the region with over 1,000 rooms in the pipeline across Kashmir Valley which represents over a 100% increase in branded hotel supply.
Historically described as the “City of Wealth”, Srinagar is a city with cultural and historical significance. Since India’s independence, the city has been a battleground for power and economic control on account of the commercial potential and cultural inheritance of the natives. Srinagar is the summer capital of the Union Territory (UT) of Jammu & Kashmir. It is in the middle of the Kashmir Valley and is situated 1,585 metres above sea level. The Jhelum River flows through the city which is otherwise famous for its gardens, lakes, and houseboats. Srinagar has a relatively continental climate. The region’s rare conditions make it one of the few in India which experience the four distinct seasons of Summer, Autumn, Winter, and Spring. The colours of Srinagar’s natural landscape morph and change from season to season with the changes especially visible in the region’s famous Chinar trees. Sheikh ul-Alam International Airport, the Union Territory’s only international airport, is in Srinagar.
The city is also on the Federal Government’s list of 100 cities selected to be developed, urbanised, and upgraded under the Smart City initiative. An array of infrastructure and city beautification projects were launched ahead of the G20 Summit’s May visit to the city. The eventual inauguration of the Zoji-La tunnel (originally planned for November last year) will allow for year-round connectivity between Srinagar and Leh, a route which has perpetually struggled with closures on account of weather conditions and heavy snowfall. This could potentially induce further demand into Leh and Srinagar by extension, which might function as part of a larger itinerary or a transit destination. The tunnel will also provide a boost to demand for Sonamarg which currently lacks favour due to the threat of road closure and tourist fears of being stranded.
Srinagar has immense tourism potential with natural beauty in the form of large freshwater lakes and Mughal Gardens. The erstwhile royal palace of the Maharaja of Kashmir is in the east zone of the district and exists today in the form of The LaLiT Grand Palace Srinagar. The city has seen a staggered increase in branded hotel supply on account of the region’s history of political instability and the threat of insurgence. The LaLiT Grand Palace Srinagar, Vivanta Dal View and RK Sarovar Portico were the only branded hotels in the market until 2017/18, a year which saw the market’s supply increase by 88%. Along with a plethora of unbranded hotels in the two-to-three-star category, houseboats are a popular accommodation choice within the city of Srinagar.
The WelcomHeritage Gurkha Houseboats, part of ITC Hotels, might represent early signs of a trend for Srinagar and Kashmir’s hotels driven by the growing popularity of both experiential travel as well as soft brands and marketing alliances. Moreover, hotel brands like ITC Hotels and Radisson Hotel Group have agreements with serial hotel owners within the market who are not only preferring to convert their hotels into branded assets, but also take on greenfield projects along with brand technical teams. All in all, the calm business environment and sense of optimism among the existing players allows Hotelivate to opine that the market opportunity for Srinagar is ripe. The high occupancies and ADRs being commanded by the branded hotels are a clear signal of insufficient supply and the robust demand in the market can only benefit from organised hotel companies joining the fray and increasing their presence. This should allow for strategic revenue management, powerful destination marketing and an overall improvement in the quality of both hotel accommodation and services.
A majority of the hotels operating in Kashmir do not serve alcohol as a result of societal pressure and religious sentiment. On-ground information has revealed that procuring a licence is not difficult and hotel owners are, at this stage, voluntarily opting for dry hotels. Having said that, hotels permit guests to consume their personal liquor on the premises. Wine shops are available in Srinagar and both Gulmarg and Pahalgam have recently seen the opening of wine shops. The limited demand for these products within the market has prevented the free availability of premium wines and spirits which are typically expected at the price-point Kashmir is currently commanding. Hotelivate is of the opinion that beverage sales, in addition to being a strong revenue opportunity, are a necessary offering to attract further demand, especially international tourists, and position Kashmir as a premier hospitality destination. We believe that it is a matter of when, and not if, the sale of alcohol becomes mainstream within the market’s hotels. As such, any new hotel projects should actively plan for a dedicated Bar & Lounge which is sure to benefit from the currently limited options.
Synonymous with a snowy winter vacation, Gulmarg, the ‘Meadow of Flowers’, is located 60 km west of Srinagar. With the current road infrastructure, the journey from Srinagar to Gulmarg takes approximately 2 hours. Mid-way through the journey, tourists must stop in Tangmarg in order to change vehicles. This is because not only do cars/jeeps need to belong to the tour and travel union of Gulmarg, but also because most of these cars employ chains on their wheels and have experienced drivers to make the steep journey up to the ski destination. Gulmarg is a purely tourist hotspot with unbranded hotels dotting the landscape against the backdrop of the Himalayas. In addition to the highest cable car in the world, Gulmarg also offers an array of winter activities such as skiing, sled rides and ATV (All Terrain Motorcycle) rides. During summers, the destination features horse rides to beautiful valleys including Strawberry Valley and Leopards Valley.
Apart from hotels, however, Gulmarg has no standalone retail or food and beverage footprint. Like the rest of Kashmir Valley, societal pressure has prevented hotels from freely serving alcoholic beverages and, at present, tourists are required to carry their own alcohol which they may consume within the hotel. The tours and activities are organised by a strong local union and hotels earn no concessionary revenue. Hotel cars are usually reserved for hotel employee usage and are not permitted to take guests sightseeing around Gulmarg. The locals who operate all transport and activities have their homes in villages closer to Tangmarg at the bottom of the mountain. As a result, Gulmarg has remained an untouched destination with no major residential or commercial developments. Tourists typically spend a night or, at most, two in Gulmarg; however, it is a common itinerary to opt for accommodation in Srinagar or Tangmarg and enjoy Gulmarg via a day trip. There is very little to see or do in the market post sun-down.
The hotel market in Gulmarg is dominated by independent, boutique hotels, the most famous among which is undoubtedly the Khyber Himalayan Resort & Spa. The now globally famous resort has won numerous awards from travel magazines such as Condé Nast Traveller and is, by some distance, the market’s rate leader. With an unparalleled location within the ski destination, the Khyber is perhaps the only existing hotel in the market which will seamlessly align with the government’s plan to develop Gulmarg into a destination comparable to Switzerland’s Davos.
Interestingly, over 50 hotel leases should have expired in March this year with no clarity from the authorities on the way forward. Assuming low quality accommodation is to be done away with, the government is likely to employ an auction-style bidding process for land parcels. With Kashmir’s resurgent demand on the back of COVID-19 induced ‘Revenge Tourism”, owners of existing hotels are unlikely to be granted easy renewal or friendly contract terms upon expiration of their leases. Notwithstanding this foreboding reality for the current hotel owners in Gulmarg, the opportunity for new, high-quality accommodation in Gulmarg is riper than it has ever been. With the government’s ambitious plans for the destination, first movers in the form of hotel owners, developers and companies are sure to benefit.
Known as the Village of Shepherds, Pahalgam is a town in the Anantnag district of Jammu & Kashmir and is famous for its valleys: Aru, Behtaab and Lidder Valley. Situated at a lower altitude than Gulmarg and Sonamarg but higher than Srinagar, Pahalgam is more developed in comparison to Gulmarg and is typically a two-night destination. Pahalgam can be accessed by road from Srinagar via the main highway. While traffic is usually free flowing, there are erratic stoppages by police forces which can delay travel time. In addition, there exist plans for helicopter services from Srinagar airport and rumours of a gondola/cable car setup; however, there is no concrete development plan or timeline for either of these initiatives.
In contrast to the relaxation and peaceful isolation offered by Gulmarg, Pahalgam offers a wide range of experiences throughout the year. With snowfall in winter comes the grand snow festival in January/February with activities such as horse riding, skiing and sledging. When the snow melts, Pahalgam acts as an effective base camp for numerous treks, hikes and forest trails. In the evening, visitors can step out of their hotels to enjoy standalone dining options in the local market. Shops offering handicrafts and trinkets are popular with tourists. Moreover, Pahalgam plays hosts to lakhs of devotees during the annual Amarnath Yatra; the pilgrimage to Amarnath cave lasts just over 60 days and is only possible for a brief period in the year when the cave is not covered in snow. During this time, tourists will encounter an overcrowded destination with heavy traffic, roadblocks and restrictions announced by local enforcement for security reasons. The Amarnath Yatra for 2023 began on 1 July and was expected to end on 31 August; however, bad weather conditions have seen the last few days face suspension. Like other destinations in Kashmir, serving alcohol is challenging due to public sentiment. In December 2022, a wine shop was opened in Pahalgam which was met with demonstrations and protests.
The hotel market in Pahalgam consists of a handful of independent hotels in the town’s centre with a few larger resorts located at various elevations around the town. Currently, the Radisson Golf Resort Pahalgam and Welcomhotel By ITC Hotels, Pine N Peak comprise the only branded supply in Pahalgam. These hotels are prime examples of the market’s strength in good times with both hotels boasting among the highest ADRs within their portfolios. As the town falls under the Forest Department, construction and renovation within the main town is extremely difficult. Hotels usually struggle to garner approval for even simple paint jobs and minor renovations. Resultantly, new hotels are being planned and constructed outside the main town, including the proposed 120-key JW Marriott Pahalgam. As the branded hotel footprint within Kashmir continues to grow, however, the independent hotels within Pahalgam might become attractive opportunities for hotel companies looking to enter the market via conversions.