A new report suggests that India's budget and mid-scale hotels may be overbuilt by global standards, offering far more amenities than their international counterparts. Features such as multiple restaurants, banquet halls, and event spaces have become standard across categories, driven by strong demand for weddings and social gatherings. Hotels, on average, now run more than one restaurant, even in segments where global peers typically offer none.
According to real estate consultants Savills India and Hotelivate's Building Smarter Construction Cost Insights 2025 report, accessed exclusively by Mint, this model has become deeply embedded in the way hotel assets are developed in India. The report surveyed about 600 hotels across 150 cities, covering around 40% of India’s organised hotel inventory.
“Even in the budget segment, hotels in India typically offer more food and beverage outlets than their counterparts in Europe or the US. This is not a new trend but reflects long-standing consumer expectations around service and facilities,” said Megha Tuli of Hotelivate-Savills. Savills acquired Hotelivate last week.
What was once limited to luxury properties is now becoming standard across categories. Across segments, hotels are adding more food and beverage outlets, event spaces and leisure facilities such as pools, spas and wedding-sized banquet halls. India currently has just over 2,100 branded hotels. Branded hotels are those operated under recognised hotel chains or brands, typically following standardised quality, service and management practices.
Tuli sees significant scope for more such amenity-rich hotels across India.
This reflects how hotel demand works in India. Guests often use hotels for weddings, family gatherings and group travel. The room is just one part of the stay. Tuli said this has been the case in India, where hotels tend to offer more than their global peers.
Vikramjit Singh, founder of Alivaa Hotels and Resorts, told Mint that this structure is especially strong outside large cities, where non-room revenue plays a much bigger role in how hotels are designed and priced. “This could be because in tier-II and tier-III cities, food and beverage and banqueting are critical. Non-room revenue can contribute as much as 60% of total business, which makes it essential for even mid-market hotels to offer multiple restaurants and event spaces. A rooms-only product simply will not work in these markets,” he said.
Hotels in smaller cities are shaped by how customers perceive them. “In smaller cities, hotels are not just selling rooms. They are selling an experience. The perception created by food and beverage outlets, banquet spaces and social areas directly influences how much customers are willing to pay for a room,” he said.
That shift is showing up in prices. Nationwide hotel room occupancy has held steady at around 67-68%. But average room rates have continued to rise to about ₹9,000-9,100, up 8-9% from a year ago, the report added. This comes after three years of strong performance for the sector.
The increase is also reflects what hotels are building. Newer hotels are larger and more service-heavy with multiple dining options, larger banquet spaces and more leisure facilities, making them more expensive to build and operate. This, over time, could also support higher room pricing.
The report estimates that the average cost of developing a hotel room is now around ₹1.36 crore, with wide variation across categories, with the median cost being at about ₹1.04 crore. The cost varies sharply across categories, with luxury hotels costing about 6.2 times more per room than budget properties, largely due to higher space allocation and additional facilities.
Room rates strong
Tuli added that while amenities play a role, pricing is still largely driven by broader market dynamics. “Room rates are ultimately a function of demand and supply. While additional amenities shape perception and positioning, they are not the sole driver of pricing, and India is seeing a strong and sustained demand for hotel rooms right now, with pricing holding strong,” he said.
There are early signs of moderation in some markets, though. Goa and Lucknow have seen some softening as new supply enters. This is typical of the hotel cycle, where strong performance attracts new development and eventually balances demand.
India is set to see fresh organised hotel room supply. Over 50,000 branded hotel rooms were signed in 2025, Tuli said, and the pipeline now stands at more than 120,000 rooms, which is over half of current organised inventory of upwards of 200,000. While this will ease price pressure on travellers, the impact is likely to be gradual.
External disruptions have also affected short-term performance. Heavy monsoons in parts of Himachal Pradesh, Sikkim and Uttarakhand, along with geopolitical tensions created temporary disruptions in travel. These, however, have not changed the broader demand trend.
