The hospitality industry stands at the crossroads of innovation and expectation, driven by a convergence of cutting-edge technology and evolving guest preferences. By 2025, the sector is anticipated to witness a paradigm shift, with personalisation, sustainability, and enhanced operational efficiency defining its landscape.The numbers paint an optimistic picture: The Indian hospitality market is projected to grow at a compound annual growth rate (CAGR) of 10.5 percent until 2027, fueled by rising disposable incomes, domestic and international travel, and the growing Meetings, Incentives, Conferences, and Exhibitions (MICE) segment, according to Axis Securities’ 2024 report.While technology and data analytics are unlocking unprecedented opportunities for guest engagement, they are also introducing new complexities. Beyond the obvious trends, there lies a deeper narrative—one of untapped perspectives that are less explored yet equally vital for shaping the industry’s future.How can hospitality brands infuse emotional intelligence into AI-driven services? Will Tier II and III cities become the next growth engines? What lies beyond traditional revenue models, and how can sustainability evolve into a core philosophy rather than a checkbox exercise?Beyond technology: The emotional economy in hospitalityIn a world increasingly dominated by automation and contactless technologies, the ability to connect emotionally with guests is emerging as a vital differentiator for hospitality brands. The 2025 Hospitality Report by Oracle and Skift revealed that while 53.6 percent of global travelers prioritise contactless check-in, 25 percent of Gen Z travelers expressed dissatisfaction when no human staff were available. This dual demand underscores the need for a hybrid approach that balances technological convenience with human interaction.For Indian hotels, this emotional economy represents a critical opportunity. Emotional connections not only foster brand loyalty but also lead to tangible financial benefits. A report by Deloitte Insights in 2024 highlighted that emotionally connected customers are likely to spend up to 20 percent more per visit and are three times more likely to recommend a brand to others.However, achieving this balance requires strategic integration of empathy into technology-driven services. AI-powered tools, for example, can analyse guest preferences to offer personalised recommendations, but they must be paired with staff trained in cultural sensitivity and active listening.Training programs emphasising emotional intelligence have already shown success in leading hospitality chains, increasing customer satisfaction scores by 15 percent year-on-year, according to data from a 2024 survey by Hospitality Net.Decoding regional growth: Tier II and III cities as hospitality powerhousesIndia’s tier II and III cities are poised to become the bedrock of hospitality growth. According to Hotelivate Research’s 2024 report, these cities are witnessing a 13 percent annual growth in demand, outpacing the 10 percent supply growth in these regions.This trend is driven by enhanced connectivity, infrastructure development, and the rise of domestic tourism. Spiritual tourism, for instance, has contributed significantly, with Tier II cities such as Varanasi and Amritsar becoming hotspots for cultural travellers.These cities also offer untapped opportunities for premium services. ICRA’s 2024 analysis found that Pan-India premium hotel occupancy rates are expected to reach 72 percent by FY25, with Tier II and III cities contributing a substantial portion. The growing middle class in these regions, coupled with increased disposable incomes, has created a market for curated experiences and boutique properties.Yet, challenges persist. Scaling premium services in smaller cities requires addressing gaps in skilled labor, supply chain inefficiencies, and infrastructural disparities.Investments in local talent development and partnerships with regional vendors could help overcome these hurdles.For instance, some hotels in Jaipur have successfully collaborated with local artisans to enhance the guest experience, increasing their revenue by 18 percent in FY24, according to a report by Axis Securities.Hybrid revenue models: Rethinking hospitality monetisationTraditional revenue models are evolving as hotels diversify income streams beyond room bookings. According to the 2025 Hospitality Report by Oracle and Skift, 49 percent of hoteliers globally believe that non-room revenue will constitute a significant part of their business strategies by 2025.This shift is evident in India, where personalised packages, curated local experiences, and wellness retreats are gaining traction.Revenue diversification is not just a trend but a necessity. A survey by BW Businessworld in 2024 found that 43.3 percent of travellers prefer paying only for amenities they use, reflecting a growing demand for unbundled services.For example, hotels offering pay-per-use wellness facilities or on-demand dining options have reported a 12 percent increase in ancillary revenue.In India, innovative approaches such as co-working spaces within hotels and electric vehicle (EV) rentals are emerging as lucrative options. A 2024 report by Axis Securities revealed that 45 percent of hoteliers are exploring EV rentals as part of their sustainability initiatives. Additionally, properties that offer unique cultural immersion programs have seen a 20 percent higher occupancy rate during off-peak seasons.Green hospitality 2.0: Going beyond sustainability checkboxesSustainability in hospitality is no longer limited to token measures like eco-labels or minimal energy-saving practices. The concept of “Green Hospitality 2.0” represents a deeper, more strategic approach to embedding sustainability into every aspect of hotel operations.By 2025, green building certifications, renewable energy integration, and water conservation technologies are expected to become standard across Indian hotels, as per ICRA’s 2024 analysis.Yet, sustainability demands a move beyond certifications to create meaningful impact. A 2024 Hospitality Net study found that while 72 percent of travellers prefer eco-conscious accommodations, only 30 percent of hotels have implemented advanced practices like waste-to-energy systems or circular economy solutions. For Indian hotels, this shift is not only an environmental necessity but also a business advantage.Indian hotels are beginning to align with global benchmarks. In Bengaluru, a luxury property that installed a solar energy system reduced its energy costs by 25 percent in FY24. Similarly, initiatives like eco-friendly shuttle services and loyalty programs rewarding sustainable behaviors are gaining popularity.The trust paradox: Balancing data-driven personalisation with privacyThe hospitality industry’s reliance on AI and big data raises a critical question: how can hotels balance personalisation with privacy? According to Oracle’s 2025 Hospitality Report, 27.5 percent of global hoteliers identified data privacy as a significant concern, while 55.6 percent of travellers expressed moderate worries about data security.Personalisation has become a cornerstone of modern hospitality, with AI and big data enabling tailored recommendations for room preferences, dining options, and local experiences. According to Oracle’s 2025 Hospitality Report, 48.3 percent of hoteliers globally are investing in AI to enhance customer service, while 51.5 percent plan to use predictive analytics for targeted marketing.However, this reliance on data raises significant concerns about privacy, with 55.6 percent of travellers expressing moderate worries about data security and 27.5 percent of executives identifying it as a major challenge.Indian hotels must address these concerns by investing in advanced cloud-based security systems. Over 90 percent of global hoteliers are already doing so, as per the Oracle and Skift report. Transparent communication about data usage can also build trust; properties that disclose their data policies have reported a 15 percent higher booking conversion rate. A 2024 Deloitte survey found that 40 percent of travellers avoid hotels with unclear data policies, highlighting the importance of transparency. Moreover, with 90 percent of global hoteliers investing in cloud-based systems, as per Oracle, ensuring robust cybersecurity measures is critical.ConclusionAs the Indian hospitality industry prepares for 2025, it faces a dual mandate: embracing innovation while honoring the timeless principles of guest satisfaction. From leveraging emotional connections in a tech-driven era to exploring the untapped potential of Tier II and III cities, the future holds immense promise.Innovative revenue models, meaningful sustainability practices, and ethical data usage will define the sector’s ability to adapt to evolving guest expectations. The path ahead is clear: those who dare to explore these untapped perspectives will lead the way.Will the Indian hospitality industry rise to the challenge and redefine itself as a global leader in guest-centric excellence?The author, Avneesh Sood is director, Eros Group. The views expressed in this article are those of the author and do not necessarily represent those of hoteldealers.in.
Published On Dec 17, 2024 at 02:00 PM IST
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