Indian Family Businesses Tap into Hospitality

In a country renowned for its rich cultural heritage and warm hospitality, the Indian hospitality industry embodies these values. Following the pandemic, the sector is experiencing a surge in investments, driven by a growing appetite for unique dining experiences, boutique hotels, and immersive stays.

In the first nine months of 2023, the sector witnessed a significant investment of INR 1,400 crores, with family offices contributing a substantial INR 900 crores, accounting for two-thirds of the total investments. According to Jaideep Dang, Managing Director of JLL India's hotel and hospitality group, two key trends are emerging:

• Diversification by HNWIs and Family Offices: Previously successful in sectors like manufacturing, financial markets, data centres, and warehouses, High-Net-Worth Individuals (HNIs) and family offices are now diversifying their portfolios into hotel assets.

• Resurgence of Real Estate Developers: After a decade-long absence, real estate developers are re-emerging as critical players in the hospitality market.

Family businesses, built on tradition, trust, and integrity, increasingly recognise the potential of diversifying their portfolios into the hospitality industry. With their wealth of experience, entrepreneurial spirit, and long-term perspective, these family-owned enterprises align well with the dynamics of the hospitality sector and are poised to make a meaningful impact.

India - A Thriving Hub for Hospitality Investments

The hospitality industry's resilience and ability to weather economic fluctuations have piqued the interest of family businesses, driving their growing investment in the sector.

Despite challenges such as shifting consumer preferences and market competition, hospitality remains an essential and evergreen sector fueled by the enduring appeal of travel, leisure, and hospitality experiences, particularly post-pandemic.

As the industry recovers and rejuvenates, the outlook for India in 2024 and beyond appears highly optimistic. Premium hotels nationwide have seen a remarkable surge in occupancy rates, reaching an impressive 70-72%, while average room rates have soared past ₹6,000 per night, signalling a robust revival.

With international travel poised for a comeback, Crisil's projections paint a compelling picture of resilience and resurgence in India's domestic travel landscape. Occupancy rates for top hotel firms, with a combined inventory of 70,000 rooms, are expected to rise by 1% compared to the previous year, reaching an impressive 74%, putting the spotlight firmly on the domestic market.

Family Enterprises Invest in India's Hospitality Sector

Both domestic and international family businesses are eager to tap into India's vast hospitality potential.

Hyatt, a global hospitality leader, is strengthening its commitment to India, recognising it as its fourth-largest revenue-generating market. To cater to affluent travellers' preferences, Hyatt is introducing Miraval Resorts and Spas, a luxury branding initiative. Additionally, they are expanding into semi-urban markets with smaller-inventory hotels, aligning with evolving consumer preferences for leisure and lifestyle experiences, particularly among millennials.

Reliance Industries, a prominent family business, is making significant strides in boosting its retail portfolio with high-profile acquisitions. In a new development, Reliance has formed a strategic partnership with The Oberoi Hotels and Resorts, marking its inaugural foray into hotel management. This move represents a significant shift post-pandemic, underscoring Reliance's proactive adaptation to emerging market dynamics.

Many family businesses worldwide are drawn to investing in India's hospitality industry due to a convergence of factors that make the country an attractive destination for investment and growth.

Critical Drivers for Family Businesses

• Inter-Generational Wealth Preservation: Family businesses view investments in the Indian hospitality industry as a means of preserving and growing inter-generational wealth, leveraging India's growing economy and global tourist destination status for long-term capital appreciation.

• Strategic Diversification and Risk Mitigation: Diversification is a cornerstone of prudent investment strategy, particularly for family businesses seeking to mitigate risks and optimise returns. India's hospitality sector offers a diverse array of investment opportunities, enabling family businesses to hedge against volatility in other sectors and achieve a balanced risk-return profile.

• Cultural Affinity and Understanding: Family businesses thrive on a deep understanding of local cultures and values. India's rich cultural heritage and diverse traditions resonate with family-owned enterprises, making it a natural choice for investment in the hospitality sector.

  As family businesses expand into India's vibrant hospitality industry, leadership plays a pivotal role in driving success and sustainable growth. They formulate strategic initiatives, forge partnerships, and ensure operational excellence across various business facets.

  For personalised strategies and leadership advisory that will elevate your business in the dynamic hospitality landscape, contact our local office in India or reach out via our contact form.