Domestic Travelers Step In as Gulf Inbound Tourism Slows Amid Israel-Iran Conflict
NEW DELHI: The ongoing Israel-Iran war has significantly impacted inbound travel to India, particularly from the Gulf region, leading to deferments and cancellations. However, domestic travelers, who are increasingly opting to stay within the country due to global uncertainties, are filling this void, according to Anuraag Bhatnagar, CEO of Leela Palaces, Hotels and Resorts. Speaking on Friday, Bhatnagar highlighted that the luxury hotel chain, which derives 55% of its business from international guests, is seeing a shift in its clientele.
Shift in Travel Patterns Amid Global Tensions
Bhatnagar explained that guests from the Middle East have postponed or canceled their visits, contributing to a weak overall international travel sentiment. High airfares have further discouraged overseas trips. In response, a growing number of domestic travelers are choosing vacations within India, effectively occupying the spaces left by international deferments. This trend is helping sustain occupancy rates for luxury properties like those under the Leela brand.
Resilience and Recovery in Luxury Travel
Despite the current challenges, Bhatnagar expressed optimism about the quick recovery of luxury travel once the conflict subsides. With 40 years of experience, Leela has observed that luxury travel is highly resilient, bouncing back rapidly after tragic events over the past two decades. This resilience is expected to drive a swift revival in international bookings post-war.
Expansion Plans and Strategic Investments
Leela is actively expanding its footprint, with plans to enter the international market by unveiling a property in Dubai next year. Domestically, the chain currently operates 13 properties and aims to increase this number to 23 by March 2030. A significant capital expenditure of Rs 1,300 crore is underway at five locations:
- Agra
- Ayodhya
- Srinagar
- Bandhavgarh
- Ranthambore
These projects will add 1,000 hotel keys. Additionally, Leela is developing a greenfield Leela Palace in BKC, Mumbai, a joint venture with Brookfield, where each party holds a 50% ownership stake.
Ownership Model and Market Outlook
Unlike many hospitality chains that adopt asset-light strategies through management contracts, Leela, backed by Brookfield, will own 12 of its hotels. This means more than half of the projected 23 properties by 2030 will be company-owned, reflecting a commitment to long-term investment in the luxury segment. Bhatnagar is bullish on India's luxury market, noting that it is at the start of a multi-decadal growth cycle. The target audience of 7 crore households for luxury players is expected to triple by 2030, with demand growing in double digits amid limited supply additions.
This strategic focus on ownership and expansion positions Leela to capitalize on the rising domestic and eventual international demand, ensuring robust growth in the evolving hospitality landscape.
