The transformative impact of IPOs

The rise of hospitality IPOs is a positive trend. “It frees up capital, allowing companies to reinvest in assets or pay down debt, creating opportunities for further growth,” says Vijay Thacker, Managing Director, Howarth HTL India.

Nikhil Shah, Senior Director -  Capital Markets & Investment Services at Colliers, adds that IPOs provide crucial equity and patient capital, enabling efficient capital structures and long-term development. “Unlike private equity funds with shorter investment horizons, IPOs offer a more stable financial foundation for capital-intensive industries such as hospitality. This keeps investor interest high and benchmarks valuations,” he explains.

IPOs help hospitality companies achieve the scale needed to compete in a rapidly evolving market. As Puri notes, “Funds raised can be used for new hotel developments, property renovations, and acquisitions, fuelling expansion into untapped markets. They also deleverage balance sheets, creating financial stability and offering exit strategies for early investors.”

The capital infusion also allows companies to renovate properties and adopt cutting-edge technology to enhance the guest experience. Shah adds, “The influx of funds enables infrastructure investment, improving operational capabilities, facilitating market penetration, and the de-leveraging of balance sheets, paving the way for further expansion.”

Beyond access to funds, IPOs reduce debt reliance, fostering financial sustainability. With stronger financials, hospitality companies are not just surviving—they’re thriving. Puri notes, “Hotel companies with significant property ownership or high CaPex requirements can use IPO proceeds for expansion and renovation without incurring additional debt, providing financial muscle and enhancing sustainability.” Shah explains, “Many operators have used IPOs to lower debt, leading to healthier financial structures and enhanced long-term growth.” By alleviating the need for debt, IPOs shorten the lengthy gestation periods typical of hotel investments, creating financial flexibility and healthier balance sheets.

IPOs also attract domestic and international investors, fostering competition and innovation. From an investor’s perspective, IPOs create opportunities for shareholder exits. “Given the high CaPex requirements and valuations in the hospitality sector, IPOs offer an essential avenue for investor exits, which can be challenging to achieve through private equity alone,” says Puri.

Moreover, IPOs instill market confidence, signaling growth potential. This can boost share prices, improve financial outlooks, and offer flexibility for new opportunities. The scrutiny of being publicly traded also forces higher operational efficiency and governance. Shah adds, “This increased scrutiny often leads to improved governance and operational accountability, fostering trust among investors and promoting a more structured approach to business management.”

However, companies need to be prepared for this level of transparency. Thacker suggests, "Those uncomfortable with public scrutiny might prefer staying private—not necessarily for lack of transparency, but to maintain greater control and avoid the pressure of meeting quarterly expectations."

Successful  IPOs underscore the growth of India’s hospitality sector, attracting investors with the promise of high returns. Dang cautions, though, “While IPOs bring liquidity, capital, and market maturity, stock price sustainability remains uncertain. Some companies with mediocre asset quality have seen stock market success, indicating a potential lack of investor understanding of the hospitality asset class, which is physical, not software or service.”

Investment boom in India’s hospitality sector

The Indian hospitality sector is booming. The Indian Hotels Company Limited (IHCL) joined the trillion rupee club on 13th September, 2024, becoming the eighth Tata Group company to achieve a market capitalization of ₹1 lakh crore. IHCL is India's largest hospitality company, with a portfolio of 326 hotels across 13 countries and four continents.

Other Indian hospitality groups, from The Oberoi Group to SAMHI, Radisson and Marriott are on an expansion spree through strategic investments.

“2024 is expected to witness the highest trading activity yet in the hotel investment sector. Trading numbers are already up by 30% compared to last year, which itself saw a significant increase compared to the previous two decades. This industry-wide trading volume, often referred to as the ‘industry trading volume,’ has grown substantially,” says Dang. “JLL is leading the pack, capturing over 60% of the market thanks to its dedicated hotel capital markets expertise.”

Competitors such as CBRE and Cushman & Wakefield lack a specialised hotel capital markets business, which limits their participation to other asset classes like shopping malls and offices. Smaller competitors focus on management and operator contracts but do not engage in investment sales.

India's hospitality investment landscape has shifted significantly in recent years, driven by growing demand for quality accommodations and the sector’s improving performance. “Investments vary across segments, influenced by services, amenities, and the overall quality of interiors," says Puri. "HVS ANAROCK estimates over ₹55,000 crores will be invested in upcoming supply (more than 59,000 keys) by FY’28.”

Investment activity remains robust, with $93 million flowing into the sector in the first half of 2024, and a projected total of $413 million for the full year—a 22% increase from 2023, according to JLL’s Hotel Investment Trends – India H1 2024. (See box for more details). ICRA’s latest report paints a positive outlook for India's hotel industry. FY’24 is expected to close with 14-16% revenue growth, with FY’25 forecasted to grow at a moderated pace of 7-9%. Growth is driven by domestic leisure travel, a strong MICE sector, business travel recovery, and emerging trends like spiritual tourism and Tier II city development.

Thacker says projections indicate an additional 90,000 rooms will be built over the next four years, representing a 40-45% expansion, with an estimated investment of ₹70,000 to ₹90,000 crores (say around $10 billion). “Even with 60% debt financing, a significant equity investment of ₹30,000 to ₹36,000 crores is needed—excluding land costs.” The numbers slightly vary depending on who you speak to, but the projection couldn’t have been more similar.

The near-zero cash flow environment of 2020 severely impacted hotel investments, but recovery began in 2021, with investment activity reaching $133 million. Consolidation became a key theme, driven by strategic investments and partnerships aimed at achieving scale and portfolio diversification—a trend that continues through 2024.

Rising room rates and profitability driving interest

Occupancy rates for premium hotels are predicted to reach decadal highs of 70-72% in FY’24 and FY’25, while Average Room Rates (ARRs) are projected at ₹7,800-8,000 in FY’25. Though some areas have surpassed pre-2008 peak rates, overall Revenue Per Available Room (RevPAR) is expected to recover to those levels by FY’25. On the supply side, a 4.5-5% compound annual growth rate (CAGR) is expected in the medium term. However, demand continues to outpace supply, driving new project announcements and the revival of previously stalled developments.

India’s hospitality sector is closely tied to the country's economic health and the strength of its tourism and real estate sector.

Domestic travel demand continues to surge, driven by infrastructure growth in both business cities and leisure destinations.  Domestic tourist visits are expected to double by 2030, reaching 5.2 billion, according to HVS ANAROCK research. This surge is driven by rising disposable incomes, the growing number of HNIs, and improved last-mile connectivity through advancements in air, road, and rail infrastructure. The development of new tourist destinations is also contributing to this growth.

On the inbound tourism front, India is increasingly attractive, thanks to its cultural heritage, improving infrastructure, and government initiatives like tourism circuits and visa reforms. “Foreign Tourist Arrivals (FTAs) show strong post-COVID recovery, with 2024 projections nearing 10 million. Leisure travel accounts for much of this growth, with 46% of FTAs in 2023 driven by holidays and recreation,” says Shah.

The surge in activity isn't happening in a vacuum. “The healthy travel indicators have led to stable occupancy levels and significant increases in room rates. Although room rates are expected to plateau depending on market conditions, gross operating profits (GOPs) remain robust, maintaining a high yield on investments. Hotels are enjoying high occupancy rates and are able to command top dollar for their rooms. This translates to robust profitability, making hotels a hot commodity for investors seeking lucrative returns,” says Dang.

This profitability drives the demand for high-yielding operating assets, but as hotel prices increase, yields may start to compress. Investors will need to adjust to this reality, as higher prices could impact the number of trades. While fewer assets may be traded, the volume and value of transactions will remain high as quality assets continue to attract investment interest.

“Despite this momentum, India currently has around 225,000 rooms (compared to 125,000 rooms in Bangkok and 110,000 in New York), says Dang. “There is ample room for growth. The booming air travel sector further supports this, as increasing demand for accommodations will keep the market buoyant even during slower economic cycles.”

The investment segments

The first half of 2024 has set the stage for a dynamic hotel transactions landscape, and the momentum is expected to continue.

India's hotel investment sector, fuelled by 80% year-on-year growth in Q1, is poised for a strong 2024. Transactions are expected across diverse segments, from prime city locations to emerging markets and airport districts. “The luxury segment continues to attract significant investment, representing just 13% of upcoming keys but accounting for 24% of total investment, or ₹13,200 crores. The upper upscale segment, making up 20% of the pipeline, will capture 26% of total investment amounting to ₹14,500 crores,” says Puri. “The upscale segment follows with ₹11,800 crores, while midscale and economy segments, despite comprising 45% of the supply, will attract ₹15,500 crores in investment due to lower CapEx per key. Notably, large-scale ‘big box’ developments like Fairmont Mumbai (646 keys), Marriott Marquis Delhi (590 keys), and Vivanta Bengaluru (450 keys) highlight the focus on high-capacity, premium hotels.”

Shah notes that luxury is seeing the highest influx of investments, driven by the absence of rate caps and its resilience during industry upcycles. “Investors are particularly interested in boutique experiential hotels and resorts, although premium and budget accommodations also attract investments.”

Hotelivate’s 2024 Indian Hospitality: Trends & Opportunities report identifies Bengaluru as the largest hotel market in India by inventory. “The city’s rebound was aided by numerous events during India's presidency of the G20 summit. The inauguration of the new terminal at Kempegowda International Airport in late 2022-early 2023, positioned the airport as the third largest in India, with a capacity of 52 million passengers per annum which further aided the market’s overall recovery. Traditionally one of the strongest corporate markets in the country, 2023/24 saw hotels focus on M.I.C.E. demand in order to diversify segments and reduce reliance on contracted business.”

Among the other metros the report mentions is Hyderabad because of its “growing role in the IT sector, biotechnology, medical tourism, and as a centre for multinational corporations” which is fuelling substantial demand for commercial space, hotels, and leisure resorts. “The lack of supply in Hyderabad's hospitality and commercial real estate market is a growing concern,” the report states, “but it also presents major opportunities.”

Jaipur's hotel market is driven by leisure and M.I.C.E. demand. “Despite a shallow corporate base and low per diems, the demand for hotel business remains healthy. This has led to a predominance of budget to upper midmarket positioned hotels within this area, even among proposed projects. However, palaces and resorts catering to the high-yielding leisure and M.I.C.E. business, especially social M.I.C.E., have boomed in recent years. These resorts have seen a sharp increase in average rates. This has generated significant developer interest in developing M.I.C.E.-focused resorts in the Kukas and Sitapura belts and (on the) outskirts of the city.

Beyond metros, Tier II, III, and IV cities are emerging as attractive markets for new supply, catering to domestic tourism and business travel. Cities like Indore and Coimbatore are seeing rising demand, offering first-mover advantages and capitalising on government initiatives promoting sustainable tourism and easing land acquisition.

Thacker says, “Over 60% of the new supply is planned for Tier II and Tier III cities, in smaller towns and pilgrim centres, ensuring a healthy distribution of growth across the country. This strategic spread will help alleviate potential oversupply issues in major markets while promoting tourism and business travel in emerging destinations.

“By catering to a wider range of destinations and focusing on mid-scale hotels in emerging locations, the sector maintains a balance between supply and demand.” There are several niche tourism segments that are offering new opportunities to developers and investors. “Development in Tier II and III cities is being driven by niche tourism segments like wildlife, adventure, and religious tourism, as well as corporate travel fuelled by India’s growth as a global manufacturing hub and the growth of SMEs,” says Puri.

Shah contends that development in metro areas has become saturated due to high land prices, making it economically challenging. Government initiatives promoting sustainable tourism and simplifying land acquisition further incentivise greenfield development. “In contrast, Tier II and Tier III regions often lack branded inventory, and these markets present significant opportunities, particularly for MICE and weddings, which can serve as strong revenue drivers.” This diversified investment approach reflects the industry's adaptability to the evolving demands of travellers.

Hotelivate’s report talks about the possibilities offered by the Indore market, “primarily driven by commercial demand from the automobile, manufacturing, and financial sectors. This has led to significant resident and non-resident demand for meetings, conferences, as well as wedding ceremonies. Additionally, Indore's proximity to Hindu pilgrimage sites such as Ujjain and Omkareshwar contribute to leisure demand in the market. While the city hosts several international hotel brands catering to various market segments, the number of accommodated room nights is expected to more than double over the next five years.”

In a market as vibrant as this, there is always a risk of bad investment decisions unfortunately. “Fast-moving markets often lead to mistakes, particularly when investors lack deep knowledge of the cyclical nature of the industry,” says Dang. “JLL advises clients carefully, emphasising the importance of making informed decisions based on long-term assumptions to avoid painful losses.”

The big-ticket investments

There have been several big-ticket transactions recently. JLL itself has been riding the wave, recently closing a series of deals worth over ₹800 crores (over $100 million). This includes the landmark sale of the Holiday Inn in Mumbai for a staggering 450 crores-—the largest single hotel asset sale in India's history. “Beyond trading, JLL is also facilitating greenfield investments, such as the Goa GMR Mopa Airport monetisation project, where we have successfully brokered deals for four out of five available plots, including Ginger and Emcalm Lounge.”

It’s important to distinguish between greenfield investments and trades. Greenfield investments involve building hotels from scratch, whereas trades refer to the sale of existing hotels. “In this sector, JLL leads in facilitating the transfer of ownership between sellers and buyers, with the National Company Law Tribunal (NCLT) acting as an alternative in cases of financial distress,” says Dang. According to the JLL report, investor preferences reveal that operating assets appear more attractive than greenfield projects.

Dang says that the market is witnessing a surge in liquidity from other avenues. “Banks, buoyed by the sector's strong performance, are opening their coffers to hotel investors. Meanwhile, several Indian hotel companies have taken the IPO route, signaling growing maturity and attracting even more capital into the market.” JLL expects the rest of 2024 to benefit from favourable land trends. Going by the listed hotel companies-led transactions in the first half of 2024, the upscale segment has claimed the highest share of the total transaction volume (44%), followed by mid-scale (31%), luxury (23%), and economy (3%).

Shah emphasises the significant investments flowing into various segments, including greenfield, brownfield, and operational hotels. Notable transactions include Oyo's $525 million acquisition of Motel 6 and Chalet Hotels' purchase of the Courtyard by Marriott Aravali. “Additionally, significant projects include an upscale Marriott hotel at Bengaluru Airport and a midscale hotel with over 200 rooms in Mumbai.” He estimates the total investment in the sector to be around ₹350 billion, with approximately 70,000 rooms in the pipeline over the next four years.

Despite the increase in supply, demand continues to outpace availability, particularly in key markets like Mumbai, Delhi, and popular leisure destinations. These areas are experiencing high occupancy rates, putting pressure on existing inventory and creating compelling opportunities for further development. The rapid rebound in travel demand post-pandemic, especially in the leisure and business sectors, underscores the need for ongoing investment in new and existing hotel projects.

This trend is spurring further development in both greenfield and brownfield projects. Greenfield hotel developments in India are surging, reaching pre-pandemic levels, with 48% of new hotel projects in 2023 and 53% in the first half of 2024. This shift indicates a movement away from brownfield projects, which involve redeveloping existing properties, towards constructing new hotels on undeveloped land. Experts highlight the flexibility of greenfield projects, which do not limit developers to existing structures, making them ideal for expansion into emerging markets with limited hotel infrastructure.

However, challenges persist. Developing a greenfield hotel in India can take 36-60 months due to regulatory hurdles and land acquisition issues, while macroeconomic factors like inflation and rising construction costs also pose challenges. Despite these obstacles, the greenfield boom caters to both leisure and corporate travel, particularly in the upscale segment in Tier II cities, which offer affordable land, rising disposable incomes, and less competition, creating lucrative opportunities for high-margin hotel developments.

Dang estimates that trading activity will remain robust, driven by strong economic fundamentals and sustained investor interest. “While the number of assets traded may decline, the focus will likely shift towards higher-quality establishments. As the market matures and scales up, private equity firms are expected to play a more prominent role. In essence, the Indian hotel investment market is evolving, and JLL is at the forefront, shaping its future.”

While the branded hotel segment remains a major focus, the non-branded sector also plays a significant role in the Indian hospitality landscape. For hotels with fewer than 100 keys, non-branded hotels account for as much as 50% of investments, estimates Shah.

Traditionally, this segment comprised independent hotels ranging from budget to luxury. “However, investment in these independent hotels has slowed down, with many converting to chain affiliations due to performance issues, succession planning, and the challenges of independent operation,” says Thacker.

Interestingly, a new trend is emerging within the non-branded segment, where small groups are creating unique brands and concepts in the mid-scale to upscale range, allowing them to operate independently and avoid the costs associated with established brands. “Over time, these groups may even evolve into chains, adding a new dimension to the supply space.”

Who are the investors?

The interest in India's hotel market is surging, attracting a diverse range of investors across various segments. JLL's report reveals a dynamic landscape: listed companies lead the charge with 44% of investments, followed by owner-operators (30%), and high-net-worth individuals (26%). This reflects widespread confidence in the sector's potential.

High-net-worth individuals are another driving force. “By 2023, India ranked third globally in billionaires, with 326,400 millionaires—an 85% increase from 2013," says Puri, emphasising the impact of this affluent segment on luxury travel and high-end hospitality. “Henley and Partners' BRICS Country Wealth Report pegs the number of millionaires in India at 326,400 in 2023—an 85% increase from 2013. This growing HNI segment is driving demand for luxury travel and premium hospitality services, favouring high-end resorts and bespoke experiences.”

“Adding to the frenzy are cashed-up Indian corporations and real estate developers eager to park their liquidity gained from the booming residential market into these high-yielding assets,” says Dang, highlighting the key players driving demand.  While Indian corporates such as Chalet Hotels, SAMHI, and IHCL are prominent buyers, Puri also points to the growing influence of institutional real estate players like Prestige Group and Panchshil Realty. “Owner-operators like The Leela and IHCL also play a significant role," he adds, “while global giants like Blackstone and Brookfield are increasingly partnering with local players.”

However, private equity investment remains relatively subdued due to the limited availability of large portfolio acquisitions. “Investors prefer to acquire larger portfolios, which are still scarce,” says Dang. Thacker echoes this sentiment, adding that private equity's preference for larger projects and five to seven years invested timelines is a constraint for private equity to contribute materially to development financing in the Indian market.

Despite these limitations, increased private equity and institutional investment is crucial for the industry's long-term growth. Thacker believes that attracting investors requires large platforms, which are currently being established through IPOs. “IPOs also attract institutional and private equity investment,” he notes, “freeing up capital for further expansion in the sector.”

Dang informs that it is a matter of time before the Indian hospitality sector builds scale, which will attract private equity interest. “While large portfolio acquisitions may not happen in the immediate future, this trend is expected to evolve in the coming years, similar to more mature hospitality markets like Singapore, Dubai, and Europe.”

Foreign institutional investors (FIIs) are also showing growing interest. Shah highlights Brookfield's acquisition of The Leela Group and Blackstone's partnership with Panchshil as prime examples. "Approximately one-third of all investors in the listed sector are FIIs," he reveals, underscoring their growing influence on the Indian hospitality landscape.

The influx of capital could prove to be a double-edged sword, pushing up asset prices and putting pressure on yields, warns Dang. "Savvy investors will need to adjust their expectations and brace themselves for a potential squeeze on returns," he cautions.

The challenges to investment

Beneath the vibrant world of India's hospitality industry, characterised by significant investments, IPOs, and a surge of hotels, lays a complex narrative of challenges shaping investment decisions.

Puri argues that despite a positive outlook, the sector faces numerous challenges, including shifting government policies and rising operational costs. “A primary obstacle is the slow and complex regulatory and approval process, where securing permits, environmental clearances, and zoning approvals can be time-consuming. This leads to delays that extend project timelines and increase development costs, compounded by the rising cost of construction.”

While sector expansion is promising, it has potential downsides. Thacker points out concerns about the prevalence of small hotels (30-45 rooms) signed up by chains, which raises issues of the ability to achieve consistent management standards and brand integrity amidst rising operational costs.  “This could damage brand reputation in the long term, though brand consciousness in India may not be as pronounced as in other markets. Additionally, the wide range of new owners coming in these small hotels poses risks, as many new owners lack the experience to navigate the challenges of the hotel industry, particularly during downturns, potentially leading to market instability.”

Despite these concerns, growth momentum persists, with chains eager to expand their portfolios. However, sustainable growth focused on long-term viability and responsible owners and operators—especially for smaller hotels—is essential. It's also crucial to temper expectations regarding projected growth; while over 80,000 rooms are expected to be added in the next four years, it's unlikely all projects will meet their timelines, as delays are common in the industry.

Key challenges include

• Difficulty in raising funds: Shah succinctly states that the hospitality industry in India struggles with the perception of hotels as long-term investments. “Not all companies can go public, and lenders often provide capital with tenures of seven to ten years, complicating debt servicing even with a 50% debt-to-equity ratio. Granting hotel infrastructure status could help alleviate some challenges and encourage greater investment.”

• Regulatory maze: Hospitality groups encounter regulations that vary by state, creating hurdles in obtaining approvals and adding compliance costs. This regulatory labyrinth can deter both domestic and international investors, exacerbated by inadequate infrastructure, such as poor roads and limited connectivity, which impact accessibility and the guest experience.

• Infrastructure challenges: In emerging destinations, access to essential utilities like power and water may be limited. Puri notes that hotel developers often need to invest heavily in basic infrastructure, increasing project costs and delaying completion. Land acquisition is also problematic in areas with unclear titles or strong local resistance to development.

• Need for government support: Puri emphasises the need for the central government to grant the hospitality sector both industry and infrastructure lending status, irrespective of project cost. “This critical move would significantly boost investment and incentivise hotel development, especially in underserved leisure destinations and Tier II and III cities.”

• Shortage of skilled personnel: The Indian hospitality experience relies on a highly trained workforce, but a shortage of skilled personnel raises operational inefficiencies and labour costs, and impacts service quality.

• Macroeconomic factors: Puri adds that the industry's dependence on leisure tourism and corporate travel makes it sensitive to economic performance. A “downturn in discretionary spending or business travel can immediately impact occupancy rates and revenue, undermining investor confidence. Rising inflation, fluctuating interest rates, increasing construction costs, extended development timelines, and limited financing options for non-institutional investors complicate project execution, especially for greenfield development, can dampen investor enthusiasm and slow the flow of capital into the sector.”

The growth opportunities

The Indian hospitality market is brimming with opportunities, particularly in the growing segments of villas and branded residences. “These are experiencing double the growth rate of traditional hotels and resorts, fuelled by rising demand for unique and personalised experiences. This trend is attracting significant investment, as travellers seek accommodations that offer more than just a place to stay,” says Shah.

Shah also highlights strong growth potential in the leisure and pilgrimage tourism sectors. “The opening of new gates in wildlife sanctuaries such as Tadoba, Pench, and Jawai is further boosting niche tourism segments like wildlife safaris. This diversification within the hospitality industry presents exciting avenues for expansion and investment.”

India is emerging as a key hub for manufacturing and business activities, attracting significant foreign investments that fuel corporate travel growth. “With world-class convention centres like Yashobhoomi, Bharat Mandapam, and the Jio World Convention Center now operational, MICE tourism is gaining momentum, further boosting the sector,” says Puri.

The midscale segment is well-positioned for expansion, supported by the growing middle class, increased domestic and niche tourism, and rising business travel from small and medium-sized enterprises (SMEs). This opens up the potential for the economy and budget hotel segments, which, as of 2023, accounted for only about 5% of the total branded supply in India, indicating significant room for growth.

Additionally, India is becoming a major destination for sports tourism, with enthusiasts travelling across the country to witness live events, as seen during the Cricket World Cup. “Beyond sports, entertainment tourism is gaining traction, with large-scale events like the much-anticipated Coldplay concert drawing significant attention. These evolving trends are likely to drive future investments, reflecting a broader shift toward experiential travel and a growing appetite for diverse tourism experiences,” adds Puri.

Currently, there is a strong appetite for investment in the hospitality market, with significant demand from buyers seeking hotel assets. Shah contends, “However, many deals face challenges in meeting specific requirements set by investors. Despite this, developers remain optimistic about the future, driven by the ongoing industry upcycle and potential for continued growth.”

Sustainability is also crucial in shaping the hospitality sector's development. India's commitment to sustainable tourism is growing, driven by its net-zero emissions goal for 2070 and increasing traveller demand for eco-friendly options. “With 69% of travellers actively seeking sustainable travel experiences, according to a WTTC report, eco-tourism is on the rise. This shift is vital for preserving India's natural and cultural heritage while spotlighting lesser-known regions, offering fresh perspectives on the country's diverse offerings,” says Puri.

The next step in sustainability for the hospitality sector is the rise of net-zero hotels. “Beyond operational efforts like eliminating single-use plastics and reducing housekeeping, the industry must adopt green technologies in construction to ensure net-zero energy consumption from the outset, addressing both environmental impact and public perception. For investors, this transition offers a dual advantage: supporting environmental goals while tapping into the growing demand for sustainable, eco-conscious travel experiences,” he adds.

Eco-conscious practices are influencing project designs and operations, leading to long-term benefits for investors, including reduced operational costs and increased appeal to environmentally aware travellers, says Shah. “This focus on sustainability is not just a trend but a fundamental shift in how the industry operates and attracts investment.”

To further bolster investment, Thacker advocates government support to modernise hospitality education, streamline visa processes for international travellers, and improve travel facilitation.

Government policies have supported investments

India’s economy has performed far better than many other big economies, ensuring that investments continue to flow in, in all sectors including hospitality. Hotelivate’s report 2024 Indian Hospitality: Trends & Opportunities states that India witnessed strong economic recovery with an expansion of 9.1% in 2021/22, followed by 6.9% growth in 2022/23. “Growing private consumption and government spending has supported this momentum for further growth of 8.1% in 2023/24. Despite global economic uncertainties, India's diverse economy, demographic advantage, and structural reforms are positioning it as one of the fastest-growing major economies in the world. Strong domestic demand, fuelled by rising consumer spending and a rebound in investment, is a key contributor to the economy. The Indian government’s ongoing efforts to liberalise Foreign Direct Investment (FDI) regulations in key sectors like manufacturing, technology, and renewable energy are expected to boost investor confidence.”

India's focus on infrastructure development has fueled hospitality investments. “Government initiatives like UDAN, Swadesh Darshan, Adarsh Station Scheme, and Bharatmala Pariyojna have significantly enhanced connectivity and accessibility, fueling tourism growth,” says Puri. Shah adds that state-level initiatives are also contributing. "Assam's new bill to promote tourism, with incentives like a ₹5 crore capital subsidy and 10-year GST rebate, and Maharashtra's 2024 Tourism Policy, offering benefits like 9% SGST reimbursement for 15 years and exemptions on stamp duty, are driving investment," he explains.

Despite this progress, India's current supply of approximately 375,000 quality hotel keys, with only 170,000 affiliated with brands, may struggle to meet rising demand. This indicates strong potential for further investment in the sector, as upcoming inventory is likely to be absorbed quickly.