Domestic Demand Fuelling India's Hotel Boom: Lemon Tree CMD

The landscape of travel and hotel bookings in India has seen a shift, moving beyond traditional patterns to a domestically driven ecosystem.

"If we go back 25 years ago, 65% of the business in branded or five-star hotels were international arrivals," Patanjali Keswani, chairperson and managing director of Lemon Tree Hotels, told NDTV Profit on Monday. "Now, the number of foreign tourists have only increased marginally, whereas domestic tourism has gone through the roof."

Today, the broader demand for hotels is largely accounted for by the domestic demand. This shows how travel and hotel booking has changed in recent years.

The real game-changer has been the explosive growth of domestic tourism, cites Keswani. This fundamental shift means that even luxury hotels, traditionally reliant on foreign visitors, now find their primary revenue driver in Indian travelers.

For Lemon Tree Hotels, this trend was already ingrained, with 85% to 90% already coming from domestic business. When international travel dipped, especially during the pandemic, the robust domestic business and leisure segments seamlessly filled the void.

The hotel industry in India is now propelled by domestic and discretionary demand, according to Keswani. This is a clear indicator of the middle class moving up into the upper middle class and a growing appetite for travel.

This is further bolstered by improved infrastructure that Keswani brings into perspective.

"We have a heatmap of India's connectivity, in the last five years, the number of highways have doubled and is set to see more growth. Vande Bharat, the number of airports in India set to increase in the coming years are indicators to a massive spurt in demand for tourism," he explained.

Keswani's outlook on the Indian hotel sector is optimistic, backed by these cues. He categorises travel into three main types that are business, tourism, and leisure.

Business travel, he notes, "is growing super fast, alongside leisure for a significant cohort. The increasing frequency with which individuals utilise hotels — whether for vacations, spiritual travel or business — signifies a broad-based demand".

The company meticulously analyses the heatmap of India's connectivity, targeting regions where there's opportunity and shortage of rooms and growth in demand. The ongoing expansion of infrastructure and the upward mobility of the population are strong indicators of sustained growth, according to the CMD.

Keswani reveals an accelerated debt reduction plan, stating: "We will meet our target of being debt-free in three to four years, unless we list, which is very much on the cards."

An IPO, he suggests, is better earlier than later. "If we list, then a week after we list, we will be debt-free," he said. Keswani also noted that the company might have a fairly large IPO with an anticipated $100-million Ebitda.

The company aims to become an independent public company within the next two years.