India's hotel industry is facing several challenges in the year ahead amid a wave of new property openings and a weak economic backdrop, analysts say.
There are 53,000 hotel rooms in the development pipeline in India, a 27 percent increase from a year earlier, STR Global reports. Major operators, including Marriott and Hilton, are planning to expand aggressively in the country over the next few years.
"The next couple of years will be pretty challenging in India as there has been a fair amount of supply," Michael Issenberg, the chairman for Asia-Pacific at Accor, the French hotel management company with brands including Novotel and Mercure in its portfolio, told Bloomberg.
Already India's revenue per available room -- a key hotel industry indicator which takes room rates and occupancy levels into account-- dropped to its lowest level in three years in the second quarter of the year at 3,143 rupees, Cushman & Wakefield reports.
India's economic growth slowed to a decade low of 5 per cent in the last financial year, which has impacted corporate demand for rooms, analysts say. But hotel operators are committed to expanding in India.
Hilton manages about a dozen hotels in India and is aiming to have 50 properties by 2016. Starwood Hotels and Resorts, which manages properties under brands including Le Meridien, Sheraton, and Westin, has said that it could have at least 100 hotels either open or under construction in India within the next couple of years, up from the 36 hotels it had open as of April this year.
Marriott has indicated that it is also aiming to have 100 hotels signed or open in India within the next six years, up from 21 properties that are operational now.
Companies highlight that they are looking ahead to the long-term prospects in India. The chains are hoping to capitalise on India's burgeoning population of more than 1.2 billion and the rising spending power of the country's middle class, as more and more Indians travel within the country.
"RevPar (revenue per available room) numbers are down this year, and India is one of the few markets in Asia in the negative territory," Don Cleary, the chief operating officer for Marriott in Asia Pacific, told The Times of India. "Basically, the negative RevPar is a combination of a slowdown in the economy and huge supply growth."
Revenue per available room in Delhi-NCR fell 17.9 percent to US$44.84 in August compared to the same month last year, according to data from STR Global. Room rates in Mumbai were down 21.3 percent, the figures showed.
Despite the challenges in the market, India's hotel sector is considered to be relatively undersupplied, particularly in terms of quality accommodation. Orlando has more hotel rooms than the whole of India.