May 11, 2022

HVS India – Hotel Transaction Activity in 2021

Unlike mature hotel markets where transaction activity has regained ground, hotel transactions in India have not seen the expected surge due to the stress caused by COVID.



According to a recent GlobalData report, global travel and tourism mergers and acquisitions (M&A) activity was worth US$155 billion in 2021, representing an 84% year-over-year increase, the segment of accommodation representing the largest share in terms of transaction value and volumes. During the year, the industry saw more than $27 billion in global M&A deals, up from 20 the year before. This, however, is a stark contrast to the situation in India. Hotel transactions in the country have not increased significantly post-COVID, and the sector has yet to experience a wave of struggling transactions, as one would expect due to the pandemic.

Despite signs that investors are pricing hotel assets, buyer interest in India remains limited. Yields remain tight due to uncertain market conditions and borrowing for the sector has become even more difficult than before, affecting investors’ risk appetite. Asset valuations have been challenging in a near zero cash flow environment, and the spread between ask and ask prices has widened. Additionally, valuation discounting by buyers due to the impact of COVID on the sector is not being accepted by sellers, who are reluctant to put assets on the market in the current scenario.

There were only a handful of small deals in 2021. The year started with the Express group of hotels announcing it was entering the leisure segment with the acquisition of seven Cambay properties Hotel operated by Neesa Leisure Ltd. This transaction is governed by the Insolvency & Bankruptcy Code (IBC), and its completion is subject to the approval of the National Company Law Tribunal (NCLT). The other notable transaction was the acquisition of Spree Hospitality for INR 18.25 crore by online travel platform EaseMyTrip, in line with the latter’s strategy to expand its presence in the hospitality sector. Meanwhile, Sayaji Hotels has expanded its portfolio by acquiring a majority stake in Intellistay Hotels for an undisclosed amount.

We expect deal activity to accelerate in 2022 and beyond. Homeowners will seek to exit or reduce their debt, while lenders will seek recourse under the NCLT due to an increase in non-performing assets (NPA). Deal activity will also improve as the industry continues to recover and cash flow stabilizes. Investor interest in acquiring assets in the leisure markets will increase, due to the rapid recovery in domestic demand for leisure, especially as supply remains constrained in this segment. Rather than greenfield or brownfield projects, investors are likely to prefer operational assets or a portfolio of assets to expand their footprint. Some existing assets may also be acquired to be reallocated to another use. Also, value deals where both the lender and the owner have taken haircuts are the most likely to find buyers.

Mandeep S.Lamba, President – ​​South Asia, oversees the HVS practice in South Asia. Mandeep has spent over 30 years in the hospitality industry having worked with international hotel companies such as Choice Hotels, IHG and Radisson Hotels before becoming President of ITC Fortune Hotels in 2001. After successfully building the Fortune brand in medium-sized hotel sector in India, Mandeep ventured on an entrepreneurial journey for over 8 years, establishing JV companies with Dawnay Day Group UK and Onyx Hospitality Thailand before joining JLL in 2014, as Managing Director, Hotels & Hospitality Group – South Asia. A recognized industry leader, Mandeep has won several awards and accolades for his accomplishments. Recently, it was featured in the Hotelier India Power List of India’s Most Respected Hoteliers for the second consecutive year. Contact Mandeep at +91 981 1306 161 or [email protected]

Dipti Mohan, Senior Manager – Research with HVS South Asia, is a seasoned knowledge professional with extensive experience in creating research-based content. She has authored several “point of view” papers such as thought leadership reports, expert opinion pieces, white papers, and research reports. Contact Dipti at [email protected]