KPMG India: Travel demand to outpace supply for next decade: Yezdi Nagporewalla

“Things are moving far faster than you think. So, with technology, you have to again stay adaptable. So, if you start comparing things to the conventional way of hospitality, it is no longer going to last in the next few years,” says Yezdi Nagporewalla, CEO, KPMG India.

You have been looking at the sector in general, but also at Indian Hotels in particular, what do you see based on the learnings that you have had, how the sector is impacted, I am not necessarily going to push you to speak about Indian Hotels, but how do you see the sector and now, in your role as the CEO of KPMG, you are more in the air than on the ground traveling the world, what do you see in terms of standards, in terms of how hospitality is on the Indian subcontinent versus the rest of the world? How pricing is versus the rest of the world?
I will actually first talk about the hospitality sector, where it was once upon a time and one of our toll gates is actually COVID and we entered into COVID and we know what happened in COVID to that sector. As we came out of COVID, there has been a tremendous resurgence, especially in the hospitality sector and the right players have made the right moves in terms of adaptability and catering to the demand. So, you are seeing a reflection of that across the nation. But you will always have a mismatch between demand and supply and it is largely because the hospitality sector is interdependent on other aspects like infrastructure, like hygiene, like safety, and those aspects. So, the entire ecosystem actually has to fall into play to make it comparable with developed places.

So, demand will continue outpacing supply, you believe?
I believe so, yes, at least for the next decade I would think.

Next decade?
Yes.

But which segment do you think? Is it going to be just affordable travel and the business travel that he was talking about? Is it more towards luxury? Which end do you think in hospitality is likely to gain more traction?
Luxury will stay and Puneet is the right person to answer that but I would think as we have a burgeoning middle class, it is also non-luxury, it is also wellness, and those kind of hotels and hospitality, plus of course tourism. So, as we get more attractive, we gain better respect globally, one would expect tourism to go up. You also have to consider that India is the anchor for sports like cricket and it was the anchor for G20 and those kind of events. Perhaps in the next two decades, we will host the Olympics.We are preparing for that. Let me put it this way. Where in the cycle of hospitality sector are we right now? We are in the fourth or fifth year where the curve has been very steep, I would say, and that is where the speed of capacity addition has gained pace, leaders and others as well. Where are we in the cycle or the cycle has got prolonged as well, in your view?
I would actually say the cycle is shortening more than prolonging.
Explain that.
Things are moving far faster than you think. So, with technology, you have to again stay adaptable. So, if you start comparing things to the conventional way of hospitality, it is no longer going to last in the next few years. Whether it is simple things like contactless check-in or maybe an AI-driven personalisation, so those aspects are going to actually shorten the cycle for you.

What I meant was that, where are we in the cycle of growth right now? You see it grown five-seven years, the earnings growth, the demand growth, all of that.
For the next decade, I would think so.

When you say that you are confident of decadal growth for the sector, what growth are you assuming? Where do you think the demand-supply is going to move? How many hotel rooms broadly will get added? How much would demand be? Just give us a sense of that.
So, at a high level, I would expect between 17% to 20% as CAGR.

If you look at the Indian consumption basket, a large part still goes in food, a large part still goes in real estate, a large part still goes in apparel, and very little goes in travel. Do you see it fundamentally changing?
The trend is definitely in that direction and to give you an example, we have work from home right now.

You still work from home?
We have concept, that concept has not gone yet, so it is there. So, it is not as if everyone is coming into their home cities and everyone is coming into offices. . And simultaneously you are also seeing a small trend of travel and work together. So, you are seeing those aspects coming in. So, as a result, the hospitality also has to cater to those pieces in that sense.

Closing comments from you?
So, I think it is very interesting times, the decade that I am talking about and it is going to be a good challenge of interdependencies because this sector is not just this sector on its own, it is dependent on infrastructure, it is dependent on service, it is dependent on economy, spend, all of those pieces. So, it is interesting to see how this is going to evolve.