What's Happening?
India's hotel sector is undergoing a transformation, moving away from a volume-based business model to focus on pricing integrity and premium offerings. This shift is driven by rising domestic tourism, infrastructure expansion, and trends such as wellness
tourism. The sector's RevPAR is expected to grow further, particularly in Tier two and three cities, supported by infrastructure improvements and a growing middle class. In 2024, India recorded nearly 3 billion domestic trips, making it one of the largest internal travel markets globally. The travel and tourism sector contributed USD250.2 billion to GDP in 2024 and is projected to grow at a CAGR of over 9.3%, potentially doubling its contribution within the next five to seven years.
Why It's Important?
The growth of India's hotel sector is significant for global investors, offering a rare combination of scale, premiumisation, and resilience. As the sector continues to expand, it presents opportunities for investment, particularly in Tier-2 and Tier-3 cities. The focus on domestic tourism and infrastructure development positions India as a key player in the global tourism market. Investors are taking note, with hotel deals totaling USD 340 million in 2024, ahead of countries like Japan. The sector's ability to convert revenues into sustainable bottom lines, despite challenges, highlights its potential for profitability and efficiency.
What's Next?
India's hotel sector is expected to continue its growth trajectory, with further infrastructure improvements and a focus on premium offerings. Investors are encouraged to embed ESG into capex and target policy-linked hubs to ensure success. If execution keeps pace with demand, India could set a new model of multi-nodal, domestically anchored growth for the next decade. The sector's ability to control costs and strengthen tax alignment could enable it to match European margin stability, offering lower downside risk and broader opportunities for global investors.
Beyond the Headlines
The transformation of India's hotel sector reflects broader economic trends, including the rise of the middle class and increased domestic travel. The focus on wellness and spiritual tourism aligns with global shifts towards sustainable and meaningful travel experiences. As India continues to develop its infrastructure, it could become a model for other emerging markets seeking to balance growth with sustainability and premiumisation.
