HBI Staff | Hyderabad 
The hospitality sector is experiencing an upcycle, driven by strong domestic demand and favorable demographics, despite a decline in international tourist inflows. With supply trailing demand, investments in infrastructure and connectivity are on the rise, pushing average revenue per room (RevPAR) growth to 8-9% this fiscal, following a 14% increase last year.
The industry, which currently has 1,66,000 branded hotel keys, is projected to add 55,000 keys over the next five years, reflecting an annual growth rate of 4.5-5.5%. A CareEdge estimate reveals that the industry’s RevPAR grew 14% in FY2024 and is expected to increase by 8-9% in FY2025.
The segment mix is increasingly shifting toward the upper midscale and midscale economy, with over 60% of new supply expected in these segments. This growth is fueled by a growing middle class, a rise in business travel, particularly from SMEs, and increased business activities in smaller towns.
Currently, more than 70% of new supply is concentrated in Tier 2 and 3 cities, as hotel owners target unmet demand in emerging markets. Over the past five years, domestic travel and tourism have contributed around 5% to GDP. With continued government emphasis, the sector is projected to grow 8-9% annually, reaching a value of USD 500-530 billion by FY34, according to the tourism ministry.
