The hospitality industry in India has experienced a remarkable resurgence in greenfield hotel investments during the first half of 2024, with hotel chains aggressively expanding into Tier-2, 3, and 4 cities. Get insights into the hospitality industry’s shift towards greenfield hotel investments in India and the challenges that come with it.
Return to Pre-Pandemic Levels
According to recent data by HVS Anarock, greenfield developments accounted for approximately 53% of hotel brand signings by keys in the first half of 2024, marking a return to pre-pandemic levels seen in 2019.
Shift from Brownfield to Greenfield Developments
Following the pandemic, there was a shift towards brownfield developments due to lower risk and faster completion timelines amid economic uncertainty. However, the focus is moving back to greenfield projects, driven by hotel chains expanding into emerging destinations.
Emerging Destinations: Tier-2, 3, and 4 Cities
Industry experts are optimistic about the potential of Tier-2, 3, and 4 cities, such as Indore, Kanpur, Bhubaneswar, Varanasi, Udaipur, Mangalore, and Coimbatore, for greenfield projects. With their growing middle-class population and increasing demand for regional travel, these cities present emerging opportunities for the hospitality industry.
Government Initiatives and Investment Shift
Government initiatives to promote sustainable tourism offer incentives for greenfield development, with some states streamlining land acquisition through single-window clearances. The hospitality sector has witnessed a significant investment shift post-COVID, with investors seeing positive returns from hotel investments.
Advantages of Greenfield Developments
Greenfield hotel developments offer flexibility and are preferred for expanding into emerging destinations due to the lack of readily available, good-quality hotel infrastructure.
Challenges and Opportunities
However, challenges such as regulatory and approval delays, heavy investment in infrastructure, and land acquisition hurdles persist. The upper upscale and upscale segment in Tier-2 cities offers an ideal blend of affordable land, rising disposable incomes, and lesser competition due to limited branded room supply.
Growth Potential in Spiritual Hubs and Tier-2 Cities
Cities like Ludhiana, Chandigarh, Bhopal, Patna, and spiritual hubs like Varanasi, Ayodhya, Puri, Tirupati, Katra, Ujjain, and Udipi offer enormous potential for upscale, boutique-style greenfield projects.
Conclusion
In conclusion, the greenfield boom in India’s hospitality industry is driven by hotel chains expanding into emerging destinations, government initiatives, and post-COVID investment shifts. Despite the challenges, the industry’s adaptability and the potential for high-margin hotel properties in these emerging destinations make greenfield developments a promising investment.
