In hotels across India, not much looks different at the first look. The check-ins are the same, the wedding crowds have not gone away and the weekend rush in Goa or Jaipur continues. But beneath that familiar rhythm, the industry is quietly shifting—towards the domestic traveller.
India’s inbound tourism has now inched past its pre-pandemic lows, but the growth has been uneven. Foreign tourist arrivals were at 20.57 million in 2024, about 15% higher than the pre-covid levels. But these soon eased off to a provisional 20.09 million in 2025, down 2.4%. Notably, nearly half this number comprises people of Indian origin.
And now, even as global travel grapples with the fallout of the West Asia war, India’s hospitality industry has entered the year on a firm footing, with demand anchored in local travel.
Growth is being absorbed largely by cities, extending the strong momentum seen in 2025. Investment activity in hotels rose to about $380 million, steadily up from $320 million in the previous year more than double the $158 million seen in 2016.
According to a new report, ‘HVS Anarock India Hospitality Industry Overview 2025’, shared exclusively with Mint, the momentum in hotel investment is expected to continue. In India, the sector has entered a structurally stronger phase in the valuation cycle, with the Hotel Valuation Index projected to grow at a compound average growth rate (CAGR) of 7.4% over FY26-FY30, indicating a sustained rise in value.
Bengaluru, Mumbai and Delhi are expected to lead the hotel development cycle, driven by jobs, corporate travel and infrastructure expansion, the report said.
The report said India’s branded hotel supply story is entering a far more expansive and balanced phase with an existing base of over 213,000 rooms as of February 2026, and a robust pipeline of about 153,000 keys over the next four to five years, the total inventory is set to cross over 350,000 rooms.
Weddings, large-ticket public events, leisure trips, weekend travel and business meetings continue to drive steady demand through the year. The demand in MICE (meetings, conferences and exhibitions) is also growing, helping hotels reduce their dependence on seasonal peaks.
“India’s tourism story is clearly at an inflection point. Our calculations suggest that domestic travel crossed 4.5 plus billion visits in 2025 (as against 3 billion in 2024), and hotel performance continues to strengthen, reflected in an average room rate growth of 8-10% and RevPAR growth of 10-12% in 2025,” said Mandeep S. Lamba, president and chief executive officer (South Asia) for the company.
RevPAR, or revenue per available room, is a metric hoteliers use to measure the performance of a hotel by the number of rooms occupied. A ‘visit’ is defined by people visiting a city they are not residents of.
Recipe for growth
Lamba said the next phase of growth will depend on India's policy and ecosystem support. “As the sector scales with this kind of demand momentum, the opportunity now lies in complementing it with enabling policy support," Lamba said. "A more calibrated push on infrastructure access, taxation frameworks, global promotion and skilling will help unlock the next phase of growth, particularly as development expands into newer markets.”
Alignment will be key as the sector expands deeper into smaller cities. “Thoughtful alignment at this stage can accelerate supply creation, improve project viability and further strengthen India’s positioning on the global tourism map, ensuring that this strong momentum translates into sustained, long-term value creation," he added.
On the demand for a good hospitality experience, Ranjit Batra, chief excutive of Ventive Hospitality Ltd, said if hotels build the right kind of properties in the major markets, there is a large travelling audience willing to pay premium prices. Much depends on the guests seeing clear value in the room and overall stay, he said.
Playing catch-up
On the supply side, the industry is expanding quickly to keep pace. In 2025, hotel companies signed deals for 64,118 new rooms across 586 properties. This was a 36% jump in rooms from the previous year and more than three times the level seen in 2019. The average hotel size also increased, rising to about 110 rooms per property in 2025 from 98 rooms a year earlier, the report said.
This expansion is no longer limited to major cities
More than 250 cities saw hotel development activity in 2025. Bengaluru led with 4,510 rooms signed, followed closely by Mumbai with 4,499. But the bigger shift is happening outside metros, with cities such as Ahmedabad, Bhopal, Siliguri, Dehradun and Lucknow seeing a steady rise in branded hotel projects.
Tier-3 and -4 cities accounted for 44% of all new hotel rooms signed in 2025, and more than half of all new properties. Tier-1 cities had a 32% share, while tier-2 contributed 24%, the HVS Anarock data shows. Most of this growth is greenfield development, accounting for nearly 60% of signed keys. Industry expansion is being led strongly by domestic operators.
The growth is becoming more distributed. “What stands out is not just the scale, but the shape of this growth. Signings surged 36% in 2025, surpassing 64,000 keys, and are now translating into a pipeline that is increasingly broad-based and geographically dispersed," Lamba said. "This shift reflects the rise of new hospitality hubs beyond traditional metros, with emerging cities and leisure destinations gaining traction on the back of improved connectivity, evolving travel patterns, and more distributed demand.”
On an average, international hotel chains continue to build larger properties, around 150 rooms per hotel, while domestic operators average about 88 rooms. Midscale hotels continue to dominate new supply, accounting for 55% of signings in 2025. Upscale and upper-upscale properties make up 35%. Luxury accounts for 8%, while budget hotels remain the smallest segment at 2%.
As for the consumers, the change in India's hospitality landscape is gradual but visible. There are now more branded hotels opening in smaller cities, the pricing is becoming more structured in mid-tier hotels, and service quality is becoming more consistent across locations.
