Try booking a hotel in Rishikesh these days. Not during peak season. Just any regular weekend. You’ll probably find a Rs 9,000-a-night room with a river view — but not without a waitlist.
Or try Goa, where even the three-star properties now come with a slick renovation, a craft beer menu and rates that could make European tourists do a double take.
This isn’t a one-off. It’s a pattern.
India’s hotel sector — long treated as a cyclical, overbuilt, underpriced industry — is suddenly in the middle of a sustained bull run. While many talk about the returns delivered by hotel stocks, few seem to be talking about just how quietly transformational this is.
Rooms Are Full, Prices Are Up and the Cycle Isn’t Done
Let’s start with the numbers.
According to HVS Anarock, February 2025 saw room occupancy climb by 2–4 percentage points over last year, with travellers still showing up — and, more importantly, paying up. Average Room Rates (ARR) jumped 14–16% year-on-year, crossing Rs 10,000 for the first time — a milestone that says less about inflation and more about confidence. This isn’t just demand. It’s pricing power. Revenue Per Available Room (RevPAR) rose 19–21%, with Chandigarh, Jaipur, Bengaluru, and Chennai leading the charge, and 11 out of 13 major hotel markets logging double-digit ARR gains.
This isn’t just a strong month. It caps a 12-quarter winning streak — three years of uninterrupted RevPAR growth. That’s not a rebound. It’s a reset.
And here’s what makes it even more remarkable: ARRs are already up 35–40% from pre-COVID levels. Most sectors would kill for that kind of pricing power. But in hospitality, rates are rising without triggering pushback. MakeMyTrip says it hasn’t seen any major down-trading. Travellers are just paying more — and doing it willingly.
Even better: this is margin-led growth. As hotel chains point out, RevPAR gains are being driven more by pricing than by volume. Occupancy in key metros is already high — 75–85% — so the gains are coming from higher ARRs, not deeper discounts.
What’s Driving this Transformation? A Perfect Storm of Demand Drivers
There’s no single reason why hotels are booming. Instead, four structural trends have overlapped to create a demand surge the industry hasn’t seen in decades.
1. Infrastructure-Led Consumption
India had 140 airports as of FY24. The government plans to push that number to 220–240 in the next few years under the UDAN and Gati Shakti schemes. New airports are coming up everywhere. Jewar (Noida) and Navi Mumbai are big-league additions.
At the same time, airlines are on a buying spree. IndiGo has ordered over 1,000 aircraft — the largest single airline order in history. Air India, under Tata, ordered another 470 planes. That’s over 1,500 aircraft on order — more than double India’s current flying fleet.
More airports. More flights. Cheaper fares. Better connectivity. It’s not just good for airlines — it’s rocket fuel for hotel demand. Travellers are reaching cities they never used to consider weekend destinations.
Patu Keswani of Lemon Tree puts it simply: “The first signs of this trend are SUVs, intent to travel and four-lane highways.” Infrastructure is no longer a backdrop — it’s a driver of aspiration.
2. Tier 2 and Tier 3 Cities Step Into the Spotlight
For decades, the Indian hotel story was metro-led — Delhi, Mumbai, Bengaluru. Not anymore.
Over 50% of new branded hotel supply is now focused on midscale and upper midscale segments. Chains like Lemon Tree and Ginger are deepening their presence in Tier 2/3 cities — and outperforming.
Juniper Hotels, a JV between Saraf Group and Hyatt, has seen surprising strength in renovated properties like those in Goa. These aren’t budget accommodations anymore — they’re lifestyle upgrades.
3. Spiritual and Religious Tourism Goes Premium
Ayodhya. Kashi. Tirupati. Shirdi.
Religious tourism has gone from dharamshalas and Rs 500-a-night rooms to Rs 7,000-a-night premium stays with branded chains.
This isn’t just a cultural trend. It’s a massive, underappreciated demand vertical — one that blends spiritual journeys with upgraded expectations.
4. Events and MICE Are Back — and Bigger
From the Mahakumbh and G20 to Coldplay concerts and big-fat weddings — events are back and they’re lavish.
MICE (Meetings, Incentives, Conferences, Exhibitions) tourism is no longer a side show. It’s core demand.
Indian Hotels (IHCL), which owns the Taj brand hotels among othersfor one, is seeing continued strength in both city and leisure hotels, driven by weddings, inbound events and corporate travel.
The Hidden Strength: A Different Cycle Altogether
Hotels aren’t behaving like other consumer-facing sectors.
Staples are facing rural fatigue. Electronics are cooling post-COVID. FMCG is running into base effects. But hotels are coming off a decade of underbuilding — and stepping into a multi-year demand cycle.
In Q2FY25 — traditionally a soft quarter — IHCL noted that demand still grew 7%, while supply rose just 2%, in its post-earnings call. That kind of mismatch gives hotels something very few sectors enjoy right now: the ability to raise prices without losing customers.
Add to that a strong base of domestic leisure and business travel, plus a yet-to-recover foreign tourist segment and it’s clear: the runway is long. And this cycle isn’t syncing with the broader consumption slowdown.
As IHCL bluntly put it: “What you see in other consumer sectors doesn’t necessarily apply to hotels.”
So What’s the Catch?
There isn’t one. And maybe that’s the risk.
When things look too good — sustained pricing power, full occupancy, disciplined supply — they rarely stay that way forever.
Pricing has already jumped 35–40% from pre-COVID levels. That’s fine when demand is rising. But how long before affordability becomes an issue?
Yes, only 80,000 new branded rooms are expected over five years. But if profitability continues at this rate, expect that pipeline to expand. History suggests the industry is quick to chase a good thing.
Also, let’s not forget: this is still a domestic-led boom. Foreign tourist arrivals remain 10% below 2019 levels. That’s upside if they recover — but a risk if global macro turns volatile.
Why This Time Might Actually Be Different
Moreover, this feels familiar. The boom. The optimism. The pricing power. But here’s what’s new.
The industry isn’t chasing growth the old way.
There’s a decisive shift towards asset-light expansion. Hotel chains are increasingly using management contracts, franchise models and brand partnerships instead of building and owning every property.
The benefits? Lower risk, faster scalability and less capital stuck in real estate. Brands like Lemon Tree and Indian Hotels (IHCL) are now expanding into Tier 2/3 cities without having to buy land or sink in massive upfront cash.
This doesn’t just reduce debt — it also reduces the risk of overbuild. Developers can scale based on real demand, not on ten-year projections that fall apart in year three.
If this discipline holds, the current upcycle could last longer — and run smoother — than the boom-bust cycles of the past.
The Market View: What’s Priced In?
Lemon Tree. Juniper. IHCL. Chalet.
All of them are riding this cycle well. Midscale focus, asset-light strategies, renovation-led repositioning — they’re ticking the right boxes. But the market has caught on. Valuations reflect optimism.
Hotel Stocks – 5-Yr Performance
Hotel Stocks – Financial Snapshot
So, the real investor question is: what happens if growth moderates? Not crashes. Just slows. Because stocks priced for perfection don’t need bad news — they just need slightly less good news.
The Bigger Picture
This isn’t just a hospitality boom. It’s a snapshot of India’s changing economic DNA.
Travel is no longer a luxury. It’s a lifestyle. Weddings are no longer local. They’re destination events. Pilgrimages are no longer spartan. They’re curated experiences.
Infrastructure, aspiration and middle-class confidence are coming together — and hospitality sits right at the center.
What’s different this time is that the sector isn’t running ahead of itself. It’s growing with purpose. Demand is real. Supply is disciplined. And strategies are smarter. For once, the cycle isn’t being driven by cheap capital or blind optimism — but by structural shifts that are reshaping how India moves, celebrates and explores.
So yes, the rooms are full. The rates are firm. The mood is buoyant. But more importantly — this might just be the beginning of India’s most enduring travel story yet.
Disclaimer
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
Disclosure: The writer and his dependents do hold the stocks discussed in this article. The website managers, its employee(s) and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.