New Investment Trends in Travel and Hospitality

The Indian tourism and hospitality industry has surfaced as one of the critical drivers of growth in India's services sector in recent years.


By 2028, India’s tourism travel and hospitality industry is expected to become a $460 billion industry. While the COVID-19 pandemic hit travel businesses the most due to their nature in 2020, it was the largest service industry in India, worth $234 billion in 2019. The industry has also become one of the largest Foreign Exchange Earners in India, with earnings of $29.962 billion over Jan 2019 – Dec 2019, equating a growth of 4.8% over 2018.

According to data from the World Travel and Tourism Council (WTTC), tourism revenue generated in 2019 was $194 billion, amounting to almost 8.8% of India’s GDP. As of 2019, the industry employed 39.80 million people. The sector is predicted to grow at an annual rate of 6.9% to $460 billion by 2028, 9.9% of GDP.

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Although the tourism industry is cyclical, its trade flow has been solid and steady over the last decade.

Development possibilities have pumped considerable sums in the travel and hospitality industry

Such staggering numbers reflect good prospects for the industry. India’s travel, tourism and hospitality industry has attracted many new investors and venture capitalists for reconstruction and development.

The infrastructure development industry has invested in destinations, tourism, resorts, hotels, etc. The main emerging areas as investment points include rural areas, adventure, pilgrimage and other special facilities. A sustainable tourism model will be achieved only with strategic investments in start-ups and businesses. 

With the advent of technology, industry ancillary functions such as travel agencies, taxi services and recreational facilities have also improved. As the trillion-dollar global hotel and travel market grows, entrepreneurs are also increasing and defining the opportunity to live up to the expectations.

The venture capital community is still focused on travel and hospitality. Silicon Valley giants such as Airbnb and Kayak have invested heavily in Indian start-ups and the travel and hospitality industries. MakeMyTrip Limited recently announced that the value of its highly converted bond has risen to $200 Million.

Although the tourism industry is cyclical, its trade flow has been solid and steady over the last decade. High-level financing cycles are emerging in various sub-sectors of the travel and hospitality industry, including booking and business markets, short-term rentals, travel platforms and hotels.

The companies continue to raise hundreds of billions of dollars in funding. Oyo, India’s most successful hotel chain, has emerged as the most valuable Indian start-up in recent years. Oyo is backed by VC groups like SoftBank Group, Didi Chuxing, Greenoaks Capital, Sequoia India, Lightspeed India, Hero Enterprise, Airbnb and China Lodging Group. The company is currently valued at $10 billion.

COVID-19 has transformed the travel and hospitality industry

2020 was a challenging year for all vocations, and after the COVID-19 outbreak, many companies went under. Many start-ups, especially in the travel and hospitality industry, were forced to shut down their businesses.

The availability of capital was deficient in the first quarter, which resulted in many businesses’ closure. However, as the recovery starts from the damage, things are beginning to look up again, with investors looking to back bright ideas. 

Government support by “vocal for local” has also allowed Indian businesses to experiment and grow. It is expected that many companies might overcome the problem of the revenue crunch inflicted pandemic over the next 3-4 years.

Evolving physical spaces are changing how people travel

There are approximately 16.5 million hotel rooms worldwide. Hotel accommodation has reached an all-time high, proving that the model of shared apartments has created a new constant demand. In the global hotel industry’s overall view, the impact of alternative rent and accommodation remains relatively small.

About 10% of hotel room reservations are expected to be made in other accommodation markets. The line between traditional, serviced apartments and rental spaces will continue to blur. Hospitality companies strive to be fully integrated accommodation providers. The trend is towards more local experiences and, in many cases, smaller and more unique spaces.

Aakash Sharma
Aakash Sharma
Aakash writes on Startup Ecosystem, Policies, Legal and Regulatory aspects of business planning. An alumnus of Delhi University, he is assistant editor at Dutch Uncles.

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