Dynamic home-grown mid-segment hotel brands account for 60% of total branded rooms in India
Hotelogix, a global provider of cloud-based hospitality technology, has released a comprehensive white paper examining the opportunities and challenges that home-grown mid-segment hotel brands face in competition with their international counterparts
Home-grown mid-segment hotel brands account for 60% of total branded rooms in India
The white paper reveals that domestic brands are not just surviving but thriving in a market dominated by global hotel brands. These young and dynamic properties capture around 60% of the total branded rooms in the country, demonstrating resilience and innovation within the competitive Indian hotel industry.
The white paper “The Rise and Rise of India’s Home-grown Mid-segment Hotel Brands” focuses on domestic mid-segment hotel brands. It provides valuable insights from leading hoteliers who have successfully established a niche in this segment. The paper aims to uncover opportunities and offer guidance on navigating challenges to create a unique identity while meeting the distinct needs of their guests.
Home-grown mid-segment hotel brands account for 60% of total branded rooms in India
According to the insights presented in the white paper, domestic mid-market brands with limited inventory are poised for significant growth in tier 2, 3, and 4 cities. This surge is driven by international brands’ considerable challenges in establishing operational capabilities in these regions, where a remarkable 80%-85% of demand comes from domestic sources. Echoing the same sentiment, Aryavir Kumar, Managing Director of The Clarks Hotels & Resorts, says, “In 2023, domestic mid-market brands accounted for about 66% of all hotels added. Of this, 53% were in tier 3 and 4 cities.”
According to Vikramjit Singh, Founder & CMD of Alivaa Hotels and Resorts, home-grown hotel brands capitalize on their strength over international players in drawing flexible contracts with suppliers with competitive cost structures, flexible agreements, and exit terms, which helps them with rapid expansion in tier 2, 3, and 4 cities. “In 2023, approximately 70% of hotels signed were domestic brands, with an average of 70 rooms per property,” says Vikramjit Singh.
Philip Logan, Chief Operating Officer of Royal Orchid Hotels, explains that domestic brands have the flexibility to quickly utilize world-class, home-grown hospitality technology solutions. This gives an edge to domestic brands as these solutions are not only cost-effective but also better suited for Indian markets. Whereas international brands often face restrictions in their choice of technology due to the need for policy uniformity globally. “Access to cost-effective, made-in-India cloud-based solutions like Hotelogix is a significant advantage for home-grown mid-segment hotels,” says Philip Logan.
“Hotelogix has a unique advantage in working with small, large, and growing domestic hospitality enterprises. It allows us to understand their opportunities and challenges while competing with international rivals. Our white paper aims to engage industry professionals and stakeholders in discussions about exploring innovative strategies to empower home-grown brands and help them flourish on a larger scale,” says Aditya Sanghi, CEO of Hotelogix.
Hotelogix: Home-grown mid-segment hotel brands account for 60% of total branded rooms in India
Despite their success, challenges remain. Domestic brands face hurdles in attracting top talent, navigating complex regulatory landscapes, and brand perception that international players bring. They also need to up their game to compete with the established presence of international chains in tier-1 cities. “The allure of global brands poses a challenge for domestic players in terms of talent acquisition and retention,” noted Jaideep Ahuja, Managing Director & CEO of Ahuja Residency.
Yet, the outlook remains optimistic. Data shows a remarkable 70% surge in contracts for domestic hotel brands, with expectations that the Indian hotel market will reach USD 47.50 billion by 2030. The white paper ultimately positions domestic brands as not just participants but as future leaders in the evolving hospitality landscape.
Details of the White Paper
Expanding in tier 2, 3 and 4 cities
“In 2023, domestic midmarket brands accounted for about 66% of all hotels added. Of this, 53% were in tier 3 and 4 cities,” shares Aryavir Kumar Managing Director of The Clarks Hotels & Resorts.
Home-grown mid-market brands with small inventory can experience rapid growth in tier 2, 3, and 4 cities, as it is exceedingly challenging for international brands to establish operational capabilities in those areas where 80%-85% of demand is domestic. Flexible management contracts with suppliers- They have also begun exploring management contracts and franchise models as a growth strategy, providing a significant competitive advantage over international chains. Being Indian brands, they understand local people, culture, and tradition better than their bigger international rivals.
Flexible contracts, with suppliers
“In 2023, approximately 70% of hotels signed were domestic brands, with an average of 70 rooms per property,” says Vikramjit Singh, Founder & CMD of Alivaa Hotels and Resorts. To some extent, home-grown brands score over bigger international players in this area of operation. How? Without complex policies, they can quickly draw up flexible and profitable contracts with local suppliers/hotels, leading to rapid expansion in tier 2,3 and 4.
Domestic brands have a better understanding of the local/regional ecosystem. By leveraging the local elements, they can quickly determine how to create value and profit for their hotel partner.
Domestic hotel brands have lesser cost implications in terms of brand needs that the owners need to spend to be compliant. Be it for aesthetics or compliance like fire and safety etc. Domestic brands’ cost structures are far more competitive than international brands and are far more flexible on their contractual and exit terms. Additionally, international brands are keen on management contracts. Property owners and travel agents in tier 3 and 4 cities are more likely to work with growing mid-segment domestic brands, which can offer domestic travellers personalized experiences. They are also flexible on service inclusions and amenities.
Access to cost-effective cloud solution
“Access to cost-effective cloud-based systems like Hotelogix is a big plus for home-grown mid-segment hotels.” – Philip Logan, Chief Operating Officer of Royal Orchid Hotels.
Domestic hospitality brands have enough flexibility to quickly adopt home-grown solutions that not only understand the requirements in the Indian context but are also popular internationally. However, international brands are restricted by their choice of technology due to policy uniformity, but may not be best suited and cost-effective. The easy availability of cloud-based solutions allows mid-market brands to leverage the power of modern technology to automate operations, sell more online, improve staff efficiency, and serve guests better.
Soft brand collaboration with international brands
“Suba Group of Hotels is a great example of how a domestic hotel brand, combined with elements of an international chain – Choice India, has expanded from a 14-hotel group to a 92-property group in just four years,” points out Chandrakant Shetty Chief Operating Officer at Suba Group Of Hotels.
He suggests that the soft brand collaboration model is an excellent option for hotel owners who want to balance independence and brand affiliation without the significant costs associated with conforming to the traditional development standards of a global brand. An international brand that understands the nuances of navigating through the compliances and market dynamics of tier 2, 3, and 4 cities can leverage this as a business opportunity – making it a mutually beneficial situation for both International and domestic brands
Quicker ROI than international brands
“For big international brands, capex per key in India is one of the biggest hurdles. For them, the ROI doesn’t make sense. But this looks a lot better for home-grown brands,” shares Kahraman Yigit Co-Founder & CEO of Olive Living.
International brands need to maintain their global standards, which often involve higher construction, operational, and compliance costs. In India, land acquisition, regulatory approvals, and premium locations add to substantial financial burden. Domestic hotels can offer similar amenities at lower prices due to their understanding of the market and lower overhead costs. International brands struggle to match these prices while maintaining their global brand equity, reducing their ROI.
Offering differential experience
“The advantage of home-grown midsegment brands is their ability to deliver customized services instantly based on guest needs,” informs Akanksha Garg Founder and Director of Waxpol Hotels & Resorts.
She says, “They are well-positioned to offer differential experiences with a deeper understanding of regional market dynamics. They can quickly grasp the cultural and demographic characteristics of the area and blend them into their offerings. About 80% of travellers will likely return to a property that offers differential experiences via top-notch guest services.
The advantage of home-grown mid-segment brands is their ability to deliver customized services instantly based on guest needs. This is a major advantage as international brands often offer cookie-cutter experiences owing to their sheer size and not-so-very-flexible policies. Mid-scale home-grown hotel brands can easily blend local culture, cuisines, etc., to craft a compelling narrative around offering differential guest experiences.
Discussing the challenges, the shared opinions reflected the flip side of what the scenario was for homegrown brands in retaining talent and market share.
Complex regulatory policies
“The authorities must look at these issues and try to resolve them for entrepreneurs who are trying to create world-class properties out of India,” Reflecting on challenges, Suresh Kumar Seasoned Hotelier & Senior Consultant to many growing home-grown hotel brands shares that hotels require trade licenses, fire safety NOC, health certificates, pollution control clearances, liquor licenses, etc. All of them vary from state to state.
For example, some states have annual license renewals, while others may offer multi-year permits. This inconsistency complicates expansion planning. For example – a hotel in Karnataka may need different health and safety compliance standards than in Maharashtra, resulting in additional administrative overhead and resource consumption.
Attracting and retaining talent
“People like the glamour that comes with a great international brand. Also, homegrown midscale brands may not offer the same growth opportunity career-wise,” is an assessment of challenges shared by Gagandeep Bindra National Sales Head of Amritara Hotels & Resorts.
Additionally, international brands may have more robust training and development programs, which can make them more attractive to potential employees. Retaining staff can also be challenging for home-grown brands due to the perceived stability, higher remuneration and benefits offered by international chains
Expanding in tier 1 cities
“Supply is an intrinsic problem for domestic midscale brands in this country. Setting up mid-scale hotels in tier 1 cities is not viable as land prices just don’t justify it,” feels Jaideep Ahuja Managing Director & CEO, Ahuja Residences.
He points out that international hotels wield significant brand power to secure large properties in tier 1 cities through management contracts. In contrast, domestic brands must contend with leasing the property that comes with high land costs and capital expenditures. Tier 1 cities are saturated with established international hotel chains that have a strong brand presence and customer loyalty. For mid-scale home-grown brands, competing with these well-known players can be overwhelming, especially when trying to attract high-value customers.
In conclusion, domestic hotel brands are well-positioned for success, with numerous opportunities outweighing challenges. They excel in catering to religious, medical, leisure, domestic, and cultural tourism, demonstrating consistent growth and improvement year over year. These hotel chains are forming partnerships with independent hotel proprietors and developers to expand their presence across tier 2, 3, and 4 cities.
However, they still need to innovate to get bigger properties in tier 1 cities as hotels in these cities add the bulk of the revenue. Reports indicate that contracts in this hotel segment surged by an impressive 70% to 75% in 2022 compared to 2019. The India Hotel Market is projected to reach US$ 47.50 Billion in 2030, and hotels in this segment are ready to capture their share of the market while competing head-to-head with bigger international brands.
Dynamic home-grown mid-segment hotel brands account for 60% of total branded rooms in India
Dynamic home-grown mid-segment hotel brands account for 60% of total branded rooms in India
Hotelogix, a global provider of cloud-based hospitality technology, has released a comprehensive white paper examining the opportunities and challenges that home-grown mid-segment hotel brands face in competition with their international counterparts
The white paper reveals that domestic brands are not just surviving but thriving in a market dominated by global hotel brands. These young and dynamic properties capture around 60% of the total branded rooms in the country, demonstrating resilience and innovation within the competitive Indian hotel industry.
The white paper “The Rise and Rise of India’s Home-grown Mid-segment Hotel Brands” focuses on domestic mid-segment hotel brands. It provides valuable insights from leading hoteliers who have successfully established a niche in this segment. The paper aims to uncover opportunities and offer guidance on navigating challenges to create a unique identity while meeting the distinct needs of their guests.
According to the insights presented in the white paper, domestic mid-market brands with limited inventory are poised for significant growth in tier 2, 3, and 4 cities. This surge is driven by international brands’ considerable challenges in establishing operational capabilities in these regions, where a remarkable 80%-85% of demand comes from domestic sources. Echoing the same sentiment, Aryavir Kumar, Managing Director of The Clarks Hotels & Resorts, says, “In 2023, domestic mid-market brands accounted for about 66% of all hotels added. Of this, 53% were in tier 3 and 4 cities.”
According to Vikramjit Singh, Founder & CMD of Alivaa Hotels and Resorts, home-grown hotel brands capitalize on their strength over international players in drawing flexible contracts with suppliers with competitive cost structures, flexible agreements, and exit terms, which helps them with rapid expansion in tier 2, 3, and 4 cities. “In 2023, approximately 70% of hotels signed were domestic brands, with an average of 70 rooms per property,” says Vikramjit Singh.
Philip Logan, Chief Operating Officer of Royal Orchid Hotels, explains that domestic brands have the flexibility to quickly utilize world-class, home-grown hospitality technology solutions. This gives an edge to domestic brands as these solutions are not only cost-effective but also better suited for Indian markets. Whereas international brands often face restrictions in their choice of technology due to the need for policy uniformity globally. “Access to cost-effective, made-in-India cloud-based solutions like Hotelogix is a significant advantage for home-grown mid-segment hotels,” says Philip Logan.
“Hotelogix has a unique advantage in working with small, large, and growing domestic hospitality enterprises. It allows us to understand their opportunities and challenges while competing with international rivals. Our white paper aims to engage industry professionals and stakeholders in discussions about exploring innovative strategies to empower home-grown brands and help them flourish on a larger scale,” says Aditya Sanghi, CEO of Hotelogix.
Despite their success, challenges remain. Domestic brands face hurdles in attracting top talent, navigating complex regulatory landscapes, and brand perception that international players bring. They also need to up their game to compete with the established presence of international chains in tier-1 cities. “The allure of global brands poses a challenge for domestic players in terms of talent acquisition and retention,” noted Jaideep Ahuja, Managing Director & CEO of Ahuja Residency.
Yet, the outlook remains optimistic. Data shows a remarkable 70% surge in contracts for domestic hotel brands, with expectations that the Indian hotel market will reach USD 47.50 billion by 2030. The white paper ultimately positions domestic brands as not just participants but as future leaders in the evolving hospitality landscape.
Details of the White Paper
Expanding in tier 2, 3 and 4 cities
“In 2023, domestic midmarket brands accounted for about 66% of all hotels added. Of this, 53% were in tier 3 and 4 cities,” shares Aryavir Kumar Managing Director of The Clarks Hotels & Resorts.
Home-grown mid-market brands with small inventory can experience rapid growth in tier 2, 3, and 4 cities, as it is exceedingly challenging for international brands to establish operational capabilities in those areas where 80%-85% of demand is domestic. Flexible management contracts with suppliers- They have also begun exploring management contracts and franchise models as a growth strategy, providing a significant competitive advantage over international chains. Being Indian brands, they understand local people, culture, and tradition better than their bigger international rivals.
Flexible contracts, with suppliers
“In 2023, approximately 70% of hotels signed were domestic brands, with an average of 70 rooms per property,” says Vikramjit Singh, Founder & CMD of Alivaa Hotels and Resorts. To some extent, home-grown brands score over bigger international players in this area of operation. How? Without complex policies, they can quickly draw up flexible and profitable contracts with local suppliers/hotels, leading to rapid expansion in tier 2,3 and 4.
Domestic brands have a better understanding of the local/regional ecosystem. By leveraging the local elements, they can quickly determine how to create value and profit for their hotel partner.
Domestic hotel brands have lesser cost implications in terms of brand needs that the owners need to spend to be compliant. Be it for aesthetics or compliance like fire and safety etc. Domestic brands’ cost structures are far more competitive than international brands and are far more flexible on their contractual and exit terms. Additionally, international brands are keen on management contracts. Property owners and travel agents in tier 3 and 4 cities are more likely to work with growing mid-segment domestic brands, which can offer domestic travellers personalized experiences. They are also flexible on service inclusions and amenities.
Access to cost-effective cloud solution
“Access to cost-effective cloud-based systems like Hotelogix is a big plus for home-grown mid-segment hotels.” – Philip Logan, Chief Operating Officer of Royal
Orchid Hotels.
Domestic hospitality brands have enough flexibility to quickly adopt home-grown solutions that not only understand the requirements in the Indian context but are also popular internationally. However, international brands are restricted by their choice of technology due to policy uniformity, but may not be best suited and cost-effective. The easy availability of cloud-based solutions allows mid-market brands to leverage the power of modern technology to automate operations, sell more online, improve staff efficiency, and serve guests better.
Soft brand collaboration with international brands
“Suba Group of Hotels is a great example of how a domestic hotel brand, combined with elements of an international chain – Choice India, has expanded from a 14-hotel group to a 92-property group in just four years,” points out Chandrakant Shetty Chief Operating Officer at Suba Group Of Hotels.
He suggests that the soft brand collaboration model is an excellent option for hotel owners who want to balance independence and brand affiliation without the significant costs associated with conforming to the traditional development standards of a global brand. An international brand that understands the nuances of navigating through the compliances and market dynamics of tier 2, 3, and 4 cities can leverage this as a business opportunity – making it a mutually beneficial situation for both International and domestic brands
Quicker ROI than international brands
“For big international brands, capex per key in India is one of the biggest hurdles. For them, the ROI doesn’t make sense. But this looks a lot better for home-grown brands,” shares Kahraman Yigit Co-Founder & CEO of Olive Living.
International brands need to maintain their global standards, which often involve higher construction, operational, and compliance costs. In India, land acquisition, regulatory approvals, and premium locations add to substantial financial burden. Domestic hotels can offer similar amenities at lower prices due to their understanding of the market and lower overhead costs. International brands struggle to match these prices while maintaining their global brand equity, reducing their ROI.
Offering differential experience
“The advantage of home-grown midsegment brands is their ability to deliver customized services instantly based on guest needs,” informs Akanksha Garg Founder and Director of Waxpol Hotels & Resorts.
She says, “They are well-positioned to offer differential experiences with a deeper understanding of regional market dynamics. They can quickly grasp the cultural and demographic characteristics of the area and blend them into their offerings. About 80% of travellers will likely return to a property that offers differential experiences via top-notch guest services.
The advantage of home-grown mid-segment brands is their ability to deliver customized services instantly based on guest needs. This is a major advantage as international brands often offer cookie-cutter experiences owing to their sheer size and not-so-very-flexible policies. Mid-scale home-grown hotel brands can easily blend local culture, cuisines, etc., to craft a compelling narrative around offering differential guest experiences.
Discussing the challenges, the shared opinions reflected the flip side of what the scenario was for homegrown brands in retaining talent and market share.
Complex regulatory policies
“The authorities must look at these issues and try to resolve them for entrepreneurs who are trying to create world-class properties out of India,” Reflecting on challenges, Suresh Kumar Seasoned Hotelier & Senior Consultant to many growing home-grown hotel brands shares that hotels require trade licenses, fire safety NOC, health certificates, pollution control clearances, liquor licenses, etc. All of them vary from state to state.
For example, some states have annual license renewals, while others may offer multi-year permits. This inconsistency complicates expansion planning. For example – a hotel in Karnataka may need different health and safety compliance standards than in Maharashtra, resulting in additional administrative overhead and resource consumption.
Attracting and retaining talent
“People like the glamour that comes with a great international brand. Also, homegrown midscale brands may not offer the same growth opportunity career-wise,” is an assessment of challenges shared by Gagandeep Bindra National Sales Head of Amritara Hotels & Resorts.
Additionally, international brands may have more robust training and development programs, which can make them more attractive to potential employees. Retaining staff can also be challenging for home-grown brands due to the perceived stability, higher remuneration and benefits offered by international chains
Expanding in tier 1 cities
“Supply is an intrinsic problem for domestic midscale brands in this country. Setting up mid-scale hotels in tier 1 cities is not viable as land prices just don’t justify it,” feels Jaideep Ahuja Managing Director & CEO, Ahuja Residences.
He points out that international hotels wield significant brand power to secure large properties in tier 1 cities through management contracts. In contrast, domestic brands must contend with leasing the property that comes with high land costs and capital expenditures. Tier 1 cities are saturated with established international hotel chains that have a strong brand presence and customer loyalty. For mid-scale home-grown brands, competing with these well-known players can be overwhelming, especially when trying to attract high-value customers.
In conclusion, domestic hotel brands are well-positioned for success, with numerous opportunities outweighing challenges. They excel in catering to religious, medical, leisure, domestic, and cultural tourism, demonstrating consistent growth and improvement year over year. These hotel chains are forming partnerships with independent hotel proprietors and developers to expand their presence across tier 2, 3, and 4 cities.
However, they still need to innovate to get bigger properties in tier 1 cities as hotels in these cities add the bulk of the revenue. Reports indicate that contracts in this hotel segment surged by an impressive 70% to 75% in 2022 compared to 2019. The India Hotel Market is projected to reach US$ 47.50 Billion in 2030, and hotels in this segment are ready to capture their share of the market while competing head-to-head with bigger international brands.
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