Indian hotel market hits records, but challenges remain

Despite turbulence across global markets — including economic slowdowns, geopolitical headwinds, and investor caution — India has maintained a strong pace. Domestic demand has been powering the hospitality industry, even when international arrivals remained inconsistent. Most leisure-heavy markets have found a rhythm, posting records in performance, but some leisure markets, such as Goa, are showing signs of fatigue.

Mumbai is once again the top hotel market, leading the country in room revenue per key and ranking in the top three for all other key metrics. Bengaluru and New Delhi complete the top three by inventory. The gap, however, between the frontrunners and the midfield is widening: the four lead urban markets — Mumbai, Delhi, Bengaluru and Hyderabad — delivered a strong performance this season, with ADR up about 8% and RevPAR up over 12% YOY. The rest of the field, by contrast, posted only modest gains of about 3.2% in ADR and 3.4% in RevPAR. The report concluded it would be folly to simply assume that the blended nationwide RevPAR jump of 5.7% is reflective of a continually strong upcycle.

The proposed supply pipeline, additionally, reflects a strategy of introducing branded hotels into 177 new markets. This strategy is powered by infrastructure development, unlocking new opportunities across the country. For the first time in over a decade, India’s proposed supply has crossed the one-million-room mark — a 58% surge in the next five years.

Leisure markets are showing strong performance at the luxury end of the spectrum. However, the influx of lower-priced hotels has diluted overall averages and, in some cases, even triggered a decline in RevPAR. Similarly, smaller industrial towns reflect ambitious supply additions that can outpace current demand realities.

Hotelivate conducted a more detailed analysis of hotel performance over the past five years, comparing existing properties with the national averages. Hotels that have been operational since before 2020-21 have delivered stronger results, achieving a 9.2% RevPAR premium over the nationwide average. Their occupancy stood at 71.9% versus the overall average of 68%, while their recorded ADR was ₹8,701 compared to the nationwide ADR of ₹8,432. The report concludes that stabilized hotels are better positioned to benefit from the ongoing industry upcycle over the past three years and are typically more resilient in the face of market fluctuations.

First-year occupancies for newer assets have ranged from 40% to 45%, a notable improvement from pre-pandemic benchmarks. However, this figure has seen a marginal decline for two consecutive years. The drop can be attributed to the growing supply in Tier 2 and Tier 3 cities, which typically have more extended stabilization periods compared to Tier 1 cities.

The evolving mix of hotel types and locations also shapes average rates for newly opened properties. Hotels launched in 2024-25 have seen a higher share of midscale and upper midscale assets, with a more noticeable presence in Tier 2 and Tier 3 markets compared to those launched pre-2020/21. As a result, their first-year ADRs have trended lower compared to hotels that opened in 2023-24.

Over 66% of upscale, large-format hotels have achieved occupancies higher than 60%, which can be attributed to these cities being primarily located in Tier 1 markets. At the same time, demand is boosted by the support of the M.I.C.E. segment. With the exception of mid-market hotels, nearly 63% of hotels across all segments achieved occupancies of 60% or higher. The lower occupancies in mid-market hotels can be attributed to the numerous new hotel openings in recent years.