Hotel chains grabbing market share in mid-segment
Millennials, as a group of customers, are driving faster growth of these hotel chains.
Chennai: Hospitality chains are fast grabbing market share in the mid-market hotel segment valued over $4 billion. Millennials, as a group of customers, are driving faster growth of these hotel chains.
Hotel chains accounted for 30 per cent of the $3.3 billion mid-market hospitality revenues in 2016. Their share has risen to 37 per cent of $4.4 billion in 2019 as the share of non-chain hotels fell from 70 per cent to 63 per cent.
While the mid-market segment was estimated to be growing at 10 per cent in 2018, hotel chains were growing by 18 per cent. On the other hand, non-chain segment were reportedly growing by 6 per cent.
Fortune, Ginger, Lemontree, Fab and Oyo Townhouse have been growing faster than the market, according to a study by RedSeer Consulting. Some of the chains have multiple brands within mid-segment to cater to different price points.
"The growth of the segment is largely driven by higher demand as well as premiumisation. One of the key factors for higher demand is growth of corporate sector in India and increased mobility of the workforce. From a demographic point of view, as more millennials are joining the workforce and gaining higher spending potential, they have a higher tendency towards traveling, both for professional and leisure purposes, compared to previous generations," said Ujjwal Chaudhry, Associate Director, RedSeer Consulting.
Millennials are going to constitute a large chunk of their customer pie as 35 per cent of Indian population and almost half of the working population will be millennials by 2023. Tech-enabled services provide an alluring proposition to millennials due to convenience and transparency.
Millennials show high levels of loyalty towards a certain hotel brand. Mid-segment hotels are increasingly investing in creating high stickiness through rewarding loyalty programmes. Tech-enabled players in the mid-market segment have the highest number of monthly active users on their websites and a larger portion of sales coming from their own websites.
Further, millennials spend 40 per cent of the income on leisure and eating out. This dispensable income will translate in consumers preferring mid-segment hotels to budget hotels.