This article discusses the factors that have led to sluggish transaction activity in the Indian hospitality industry.
Deal activity in the global travel and tourism industry improved, with 573 deals (including mergers and acquisitions, private equity and venture capital financing) announced in the first half of 2022 , up 3.1% from the same period in 2021. Activity in India continues to be lackluster as the industry has yet to witness a wave of troubled deals following the fallout of COVID. Nonetheless, there are several hotel assets for sale in the market and HVS currently has over a dozen buy, sell and recapitalization mandates.
Strong hotel demand, improving industry performance and stabilizing cash flow are helping to open up the deal market and bring buyers back to the table as they seek to capitalize on the industry’s impending growth cycle. However, with the rebound in industry performance, owners are torn between selling now and holding their assets for future appreciation. Also, compared to the times of COVID when industry was not viewed positively as a lending category for banks, borrowing for industry has become relatively easier, albeit more expensive. . Additionally, asset owners want to capture expected future performance in the valuation. At the same time, buyers continue to discount the valuation due to the impact of COVID on the asset’s performance over the past two years. Therefore, the price asymmetry continues to act as a deterrent. Even assets under the jurisdiction of the National Company Law Tribunal (NCLT) have yet to be actively traded.
Buyers should recognize that with COVID being an anomaly, asset valuation should consider both its historical performance (especially pre-COVID) and anticipated future performance. On the other hand, owners looking to exit or reduce debt should realistically benefit from improving market sentiment. As long as this conflict continues, transactions will remain sluggish in the short term in a gradually maturing hospitality market.
Mandeep S.Lamba, President – South Asia, oversees the HVS practice in South Asia. Mandeep has spent over 30 years in the hospitality industry having worked with international hotel companies such as Choice Hotels, IHG and Radisson Hotels before becoming President of ITC Fortune Hotels in 2001. After successfully building the Fortune brand in medium-sized hotel sector in India, Mandeep ventured on an entrepreneurial journey for over 8 years, establishing JV companies with Dawnay Day Group UK and Onyx Hospitality Thailand before joining JLL in 2014, as Managing Director, Hotels & Hospitality Group – South Asia. A recognized industry leader, Mandeep has won several awards and accolades for his accomplishments. Recently, it was featured in the Hotelier India Power List of India’s Most Respected Hoteliers for the second consecutive year. Contact Mandeep at +91 981 1306 161 or [email protected]
Dipti Mohan, Senior Manager – Research with HVS South Asia, is a seasoned knowledge professional with extensive experience in creating research-based content. She is the author of several “point of view” papers such as thought leadership reports, expert opinion pieces, white papers and research reports. Contact Dipti at [email protected]