India’s hotel industry is expanding, but growth is skewed heavily toward luxury and upscale properties in major metros, while budget and mid-market hotels face slower demand and pricing pressures.
According to industry data for FY 2024–25, five-star deluxe hotels charged an average of INR16,797 per night in March 2025, up by nearly INR 1,200 from a year earlier. Budget hotels, in contrast, averaged INR3,581 per night, only a 4% rise year-on-year. This has widened the gap between luxury and budget stays, with premium rooms now costing about five times as much as budget ones.
Nationally, average occupancy improved slightly to 68% (from 67.3%), while average daily rates rose 4.7% to INR 8,432 and revenue per available room (RevPAR) climbed 5.7% to INR 5,736. However, metro markets significantly outperformed the rest of the country: Mumbai, Delhi, Bengaluru, and Hyderabad recorded an 8.3% increase in average room rates and a 12.1% rise in RevPAR, compared to just 3% growth in smaller cities.
Industry experts said the disparity reflects strong corporate and leisure demand in tier-1 cities, versus oversupply concerns in secondary markets. Many newer hotels outside metros are struggling to achieve rate growth as supply expands in line with demand. Established properties, meanwhile, continue to outperform, with pre-2020 hotels earning nearly 9.2% higher RevPAR than the national average.
India’s hotel pipeline also points to rapid expansion. As of March 2025, the country had 114,151 branded rooms in development, a 58% increase expected over the next five years. Nearly half of this new supply will be in the mid and upper-mid market segments, while only about 4.8% will add to the luxury category. Consolidation is also intensifying, with the top 10 hotel chains now controlling 65.3% of branded supply. Marriott leads the market with more than 24,000 rooms, followed by Indian Hotels Company Ltd (IHCL), which has a 12.2% share.
The sector has also faced temporary demand shocks from geopolitical tensions in early 2025, including disruptions to air travel during the Israel–Iran conflict and regional unrest. Still, domestic and religious tourism has provided resilience, offsetting some of the impact from international cancellations.
Analysts say the outlook remains positive for luxury and metro markets, while mid-scale operators in smaller cities may continue to face pressure from oversupply and limited pricing power.
Source : MINT
