Short duration of debt tenure – hurdle for hospitality’s growth

NOESIS Capital Advisors, arguably Asia’s largest hospitality transaction advisory company, has stated that the short duration of debt tenure is hurting hospitality’s growth prospects.

The company is currently mandated to have more than 15,000 plus keys for operator search assignment on the lease, revenue sharing, management, and franchise contract. Nandivardhan Jain, CEO & Founder of the company said, “One of the biggest hurdles to growth in the hospitality sector is the cost of capital and a relatively short duration of debt tenure. As this is a high Capex asset class, it has a longer gestation period similar to infrastructure projects like railway, road, metro and aviation. Infrastructure status to the hospitality industry is a long-standing demand of the industry. We hope the finance minister will extend this status to the hospitality industry in this union budget.”

According to him, the hotel room inventory in India is significantly lower than in other peer nations. With the Prime Minister charting the path for India to be a developed country by 2047 it has a comparatively low room-to-people ratio, i.e. We have only 0.7 room spaces per 1000 people whereas it is 10 in the United Kingdom and 20 in the United States. As the income levels are rising, the growth in our country revolves around its consumption story. The hospitality industry is one of the major contributors, hence it is imperative to increase the room supply, infrastructure status is the only long-term solution.