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Hospitality sector weathered GST, demonetisation storms well: Report

India Hospitality Report 2017 said last year turned out to be slightly better than 2016, with 173 hotel agreements signed compared with 170 deals a year earlier.

, ET Bureau|
Last Updated: Apr 20, 2018, 10.39 AM IST|Original: Apr 20, 2018, 08.24 AM IST
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Agreements signed by domestic hotels went up to 56% of total last year from 46% in 2016.
NEW DELHI: The hospitality sector in India survived the disruption caused by the introduction of a new tax regime and the impact of demonetisation, as reflected in the better-than-expected number of hotel management, franchise and lease agreements signed in 2017, according to a new report by Jones Lang LaSalle shared exclusively with ET.

“Coming on the back of demonetisation at the end of 2016 and GST (Goods and Services Tax) implementation in 2017, new hotel brand signings were expected to slow down, but the sector has weathered the storm well,” JLL Hotels and Hospitality Group said in the report. “With no significant policy changes expected to come in 2018, we except the pace of brand signings to increase from levels recorded in 2017.”

The India Hospitality Report 2017 states that last year turned out to be slightly better than 2016, with 173 hotel agreements signed compared with 170 deals a year earlier.

Of these, 62 agreements were for a change of brand compared with 33 such accords in 2016. This included the conversion of 14 Formule 1 hotels under Accor to Holiday Inn Express.

JLL said the performance in 2017 was also due to higher demand in most business locations and the 15.6% growth in foreign tourist arrivals. More than 10 million overseas tourists visited India in 2017, bringing in $27 billion in revenue.

Agreements signed by domestic hotels went up to 56% of the total last year from 46% in 2016. However, global brands signed up for more rooms – 8,868 compared with 7,152 for domestic chains in 2017. Newly built hotels comprised 53% of the total deals, conversions for 36% and hotels under construction accounted for 11%.

Management agreements retained their lead, accounting for 80% of the total signed in 2017, little changed from a year earlier. Leases accounted for only 4% of the agreements as hotel brands continued to reduce risk related to real estate exposure. Franchising comprised 15% of the total arrangements.

The share of hotel signings in tier 3 cities reduced in 2017 compared to those in 2016, which accounted for nearly half of all signings in the year. A large part of the reason for this decline has been the uptake in performance of tier 2 markets such as Jaipur, Kochi, and Chandigarh, which have continually demonstrated excellent growth in performance in recent times. As a result, interest in development of new hotels in tier 2 markets went up as per the report.

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