Looking Into Value And Returns For A Hotel Investment In The Indian Context | Sasha Menon & Sameeksha Goyal

The Indian hospitality industry has recently recovered from a volatile downturn due to the country’s economic exposure to the world economy stated Kumar et. Al., 2009; Ministry of Finance, Government of India, 2016 and has witnessed a rapid supply expansion of inventory observed Cushman & Wakefield(2014). As a result, a major supply demand gap has occured, leading to a stressed financial environment, high cost of capital, weak credit risk management and poor performance indicators, leading to hotels being labelled as non performing assets opined Goyal and Verma (2017). In this study, we aim to conduct an assessment of financial returns for the development of a hypothetical hotel project in Gurgaon. We have conducted a demand-supply analysis of the Gurgaon hotel market using publicly available sources, and thereafter provided a 10 year forecast of the proposed development. On the basis of the projections, an IRR and NPV analysis has been conducted of the project to determine potential returns as stated by Griff (2014). With the help of such a study we aim to identify, what economic metrics are key to the performance of a hotel in this present scenario of the Indian hospitality industry. The study will be useful for investors, developers, hoteliers and revenue managers to assess the market.