The Indian hospitality industry has shown phenomenal recovery and remarkable growth over the past 24 months, garnering significant attention from investors and operators alike. Fuelled by strong demand and bolstered by a supportive market environment, the sector has expanded its supply base, particularly in Tier 2 and Tier 3 cities. This article analyses hotel signings and openings during the fiscal year 2023/24, shedding light on regional trends, market segmentation, and the factors driving growth while offering insights into emerging opportunities and challenges.

Over 30,000 hotel rooms were signed across 128 Indian cities during 2023/24. Tier 3 cities captured the largest share, signing over 14,000 rooms, while Tier 1 cities saw only around 6,000 signed rooms due to land scarcity and high land prices. Almost 16,000 rooms were signed in leisure destinations, compared to 14,000 in urban locations, emphasising the sector’s focus on leisure tourism. Signings were nearly evenly divided between Indian and international hotel operators. Midmarket hotels held the largest share at 28%, followed by upscale (24%) and upper upscale/luxury (20%). Regional distribution was led by North India, which had 43% of the signed rooms, followed by West (28%), South (17%), and East (12%). Q4 2023/24 saw the highest signing activity with over 10,000 keys, while Q3 saw the least signings due to the festive period. Maharashtra, Karnataka, Uttar Pradesh, Gujarat, and Himachal Pradesh each signed over 2,000 keys, while Bengaluru, Jaipur, Goa, Navi Mumbai, and Mumbai each signed at least 1,000 keys.

Approximately 190 hotels opened in 2023/24, adding over 12,000 keys across 113 cities. Tier 2 cities saw 4,500 rooms open, Tier 3 cities added 4,200, and Tier 1 cities saw 3,300 keys open. Midmarket and upper midmarket hotels led openings with 29% each, followed by budget (18%) and upscale (17%) hotels. Both Q2 and Q4 of 2023/24 each saw the opening of around 4,000 keys. Indian operators took the lead, accounting for around 8,000 keys, while international operators contributed ~4,000 rooms. Regional distribution mirrored signings, with North India leading openings at 37%, followed by West (33%), South (20%), and East (10%). Urban locations saw 7,000 keys open, compared to 5,000 in leisure destinations. Maharashtra, Rajasthan, Karnataka, Uttar Pradesh, and Gujarat each opened nearly 1,000 keys, while Mumbai, Bengaluru, Goa, Jaipur, and Amritsar each had over 700 rooms.

The dynamic shifts in India’s hospitality landscape have revealed new growth opportunities. The rising demand for boutique hotels has opened new market segments for innovative and differentiated stays. Serviced apartments have returned to prominence, catering to extended stays and corporate travel. Banqueting facilities in hotels have gained renewed attraction, offering expansive spaces for events and conferences.

Despite the positive outlook, caution is necessary as rapid expansion might lead to oversupply pressures in some markets. Over the past decade (2013/14 to 2022/23), hotel supply grew at a 5.6% CAGR, reaching 7.5% over the past year alone, indicating rapid growth that warrants comprehensive market research and feasibility studies. A balanced, strategic approach will be crucial for sound investments and sustainable returns in India’s rapidly evolving hospitality landscape.

Source: Hotelivate Report