The Indian hospitality industry continues to be a nascent transactional market

Deal activity in the global travel and tourism industry improved, with 573 deals (including mergers and acquisitions, private equity and venture capital financing) announced in the first half of 2022 , up 3.1% from the same period in 2021. Activity in India continues to be lackluster as the industry has yet to witness a wave of troubled deals following the fallout of COVID. Nonetheless, there are several hotel assets for sale in the market and HVS currently has over a dozen buy, sell and recapitalization mandates.

Strong hotel demand, improving industry performance and stabilizing cash flow are helping to open up the deal market and bring buyers back to the table as they seek to capitalize on the industry’s impending growth cycle. However, with the rebound in industry performance, owners are torn between selling now and holding their assets for future appreciation. Also, compared to the times of COVID when industry was not viewed positively as a lending category for banks, borrowing for industry has become relatively easier, albeit more expensive. . Additionally, asset owners want to capture expected future performance in the valuation. At the same time, buyers continue to discount the valuation due to the impact of COVID on the asset’s performance over the past two years. Therefore, the price asymmetry continues to act as a deterrent. Even assets falling under the National Company Law Tribunal (NCLT) have yet to be actively traded.

Buyers should recognize that with COVID being an anomaly, asset valuation should consider both its historical performance (especially pre-COVID) and anticipated future performance. On the other hand, owners looking to exit or reduce debt should realistically benefit from improving market sentiment. As long as this conflict continues, transactions will remain sluggish in the short term in a gradually maturing hospitality market.

Mandeep S Lamba
President (South Asia), New Delhi
+91 (124) 488 5552
HVS

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