Hotel sector witnessing not just a cyclical but a structural story: Ashish Jakhanwala, SAMHI Hotels

economictimes.indiatimes.com:

«So, you have seen the supply come to a level where the incremental new supply is just barely 2% to 6%. It is a fairly stable supply environment and the demand environment is very strong and also fairly long term. So, this is a structural story, not just a cyclical story,» says Ashish Jakhanwala, SAMHI Hotels.

I want to understand from you which phase of the business cycle in your mind is the hotel sector right now. Some say that it is coming out of a 10-year bad cycle, so now that it has only been one or two years then, now there are still three-four years to go at least because it is a cyclical industry, but this time there are very strong structural tailwinds. To your mind, how is the visibility on the cycle front?
So, I think you are absolutely right.

This time what you are seeing for the hotel sector is not cyclical, it is structural. It is basically demand-supply 101. If you look for the last several years, the demand has been growing between 8% to 12% and you can see it in airlines, office space, travel and tourism.

The hotel supply is growing between 2% to 6%, not a surprise because the hotel industry in India has now evolved from being 50,000 rooms in 2008 to about 150,000 to 200,000 rooms right now.

So, you have seen the supply come to a level where the incremental new supply is just barely 2% to 6%. It is a fairly stable supply environment and the demand environment is very strong and also fairly long term. So, this is a structural story, not just a cyclical story.

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