The global upheaval and the economic reality

In April 2025, global markets reeled from new U.S. tariffs, including a 26% levy on Indian imports, though they temporarily paused the move for 90 days. The announcement sent the Sensex plummeting 2,200 points and the rupee to 86.68 against the dollar. On April 7, 2025, the day the tariffs were announced, the Nifty 50 crashed by 743 points, marking one of the largest single-day drops of the year, fuelled partly by fears of a trade slowdown. This volatility is increasing risk aversion among investors, leading to capital outflows from emerging markets like India and further pressuring the rupee.

While global tariffs and stock market volatility don’t directly target India’s hotels, their economic ripples are hard to ignore. The U.S.'s 26% tariff on Indian exports—electronics, textiles, and gems—threatens sectors employing millions. In Surat, diamond polishing units face layoffs, with thousands of jobs reportedly at risk. A weaker rupee inflates import costs, pushing inflation to 3.62% in February 2025. For households, this translates into less disposable income for leisure travel—a cornerstone of hospitality revenue.

Jesper Palmqvist, Senior Director for Asia Pacific at STR, offers perspective: “I look at it from both short-term and long-term angles. Right now, escalating trade wars and tariff hikes could drag down GDP growth. If inflation rises again and interest rates don’t fall, consumer spending could slow, directly affecting hotel occupancy and rate growth. If tensions ease within a quarter or two, the impact will be limited. But if trade wars persist for six to nine months or longer, we could slip into global recessionary territory, and hospitality will feel the hit. In a tighter economy, discretionary spending, including travel, tends to fall—we already saw that in China last year. Fortunately, India and Indonesia, with their large domestic markets, are better insulated. India's low dependence on any single external market is an advantage. After the pandemic, funding access was very tight, but it had recently started opening up, with green loans and sustainability-linked financing gaining traction. With current global uncertainty, however, capital access will likely tighten again.”

What helps India, according to Palmqvist, is the strength of family money. “Much of India’s hospitality sector isn’t overly dependent on capital markets. Family money, traditional conglomerates, and deep banking relationships insulated the industry during past shocks—and they’re doing the same now. So even if public markets tighten, private money will still keep parts of the expansion alive.”

Operational challenges are mounting, as hotels relying on imported goods now face higher costs due to a weaker rupee. CBRE India notes a significant rise in food and beverage input costs, which may impact mid-scale hotels the most. Stock market turbulence has also triggered substantial outflows from Indian equities, potentially affecting high-net-worth travellers and corporate travel budgets. MICE events, crucial for metro hotels, are seeing cancellations as firms brace for uncertainty. Regional disparities are emerging, with leisure destinations facing sharper booking declines compared to metro areas buoyed by business travel. Industry forecasts suggest a potential downward revision in projected occupancy and Average Daily Rates if tariffs are reinstated post-July 2025.

The tariffs also have a knock-on effect on global supply chains, potentially increasing costs and causing delays for hospitality developments relying on imported materials. Rising input costs could affect ROI projections for new hotels and resorts, particularly in the luxury and upper-upscale segments.

Mandeep Singh Lamba, President & CEO, India & South Asia, HVS Anarock, says, “Trade disputes can drive up input costs, disrupt supply chains, and shift global investment flows as companies rethink their strategies. In hospitality, such economic uncertainty may dampen consumer confidence and curb discretionary spending on travel and leisure. The anticipated recovery in international travel could also face delays, with domestic demand remaining the primary growth engine for the Indian hospitality sector. In this environment, hospitality businesses must reassess cost structures, boost operational efficiencies, and adopt flexible pricing strategies to stay resilient. Although the immediate impact remains limited, vigilance and adaptability will be critical as global conditions continue to evolve.”

Skift Research has flagged concerns about the impact of U.S. tariffs and stock market volatility on hotel investments, with implications for India. Skift reports that U.S. tariffs, particularly those announced by President Trump, are creating significant challenges for the global hotel industry, including potential impacts in markets like India. “The tariffs, which are on a 90-day moratorium, if brought back at 26% duty, are driving economic uncertainty and market volatility, which affect investor confidence and hotel performance. This uncertainty is causing a slowdown in bookings and prompting hotel asset managers to adopt cost-saving measures and rethink marketing strategies. For instance, HotelAVE, a major asset manager overseeing $12 billion in hotels, is advising hotels to stock up on critical imports and adjust pricing to mitigate supply chain disruptions caused by tariffs,” it states.

According to Lamba, while India’s hospitality sector is largely domestically funded and demand-driven, it does not operate in a vacuum. “The direct impact of ongoing global tariff disputes, such as the recent U.S. tariff announcement, currently under suspension, is negligible for now. However, global trade tensions and economic uncertainty inevitably influence investor sentiment across asset classes, including hospitality. Hospitality stocks have mirrored broader market trends, but the long-term appetite for quality assets in India remains intact.”

The resilience of Indian stock market and industry

The good news is that despite stock market volatility and the looming threat of a global recession if tariffs are enforced, India’s stock market and hospitality industry remain resilient. After months of withdrawals—Foreign Institutional Investors (FIIs) pulled $15 billion from Indian stocks in 2025, driving a 743-point Nifty drop in early April—they have stormed back, pumping nearly ₹15,000 crore into stocks over three trading sessions, a dramatic turnaround after nine straight sessions of selling. The Sensex has bounced back, partly attracted by a projected 6% GDP growth.

Jehangir Aibara, Director, Mahajan and Aibara, downplays the impact of global trade upheaval: “I don’t think the global macroeconomic situation has too much of an impact on the hospitality sector in India. Of course, there might be some effect on inbound tourism, but it won’t be significant. And, anyway, our dependence on inbound tourism is quite minimal—very little. Also, our base is still very low—inbound traffic numbers haven’t moved meaningfully for several years now.” He adds that despite volatility over the past two to three years, hotel stocks have performed remarkably well, often outperforming the broader market. “Despite fluctuations—even with global trade issues causing some market swings—hotel stocks have remained fairly resilient. Also, because we’re not overly dependent on inbound travel—we're largely a domestic consumption story—the sector has been quite stable. So from an investment perspective, both retail and institutional investors will likely continue investing in hotel stocks. I’ve received a steady stream of inquiries from investors—mutual funds, and venture capitalists—seeking insights on specific hotel stocks. That wasn’t the case earlier. Hospitality was rarely on anyone’s radar, but today, hotel stocks are firmly in focus, with most portfolio managers now allocating towards the sector.”

As the economy stabilises, the hospitality industry’s growth continues unabated. JLL’s latest survey reveals that India's hospitality sector demonstrated remarkable resilience and growth in 2024, maintaining investment levels on par with the previous year. “This robust performance, as reported by JLL's latest analysis, signals a strong recovery and expanding footprint for the industry across the subcontinent,” it says.

The investor landscape has been diverse, with HNIs, family offices, and private hotel owners leading at 51% of transaction volume. Listed hotel companies followed at 34%, while owner-operators and real estate developers contributed 8% and 7% respectively. “CY 2024 witnessed 42,071 keys in terms of branded hotel signings and 11,352 keys in terms of branded hotel openings,” says the JLL analysis.

In a press statement, Jaideep Dang, Managing Director, Hotels and Hospitality Group, India, JLL, said, “The first quarter of 2025 has ignited a dynamic hotel transactions market, with JLL already facilitating two deals in Chennai and Goa. Investor enthusiasm for operational assets and land parcels underscores the sector's attractiveness, buoyed by favourable economic conditions, expanding commercial markets, and the government's recent budget push for tourism. This positive outlook is reinforced by substantial hotel development across various tiers, with over 42,071 keys signed in 2024. Following 2024's record-breaking year in hotel investments, openings, and signings, 2025 has commenced strongly and is further expected to maintain this momentum.”

Expansion plans of Indian hospitality groups are firmly in place and unlikely to be rolled back anytime soon. Puneet Dhawan, Head of Asia, Minor Hotels, underscores the growing investor confidence: “India will continue to attract increasing Foreign Direct Investment, as seen in recent hospitality IPOs like Samhi Hotels, Ventive Hospitality (a joint venture between Panchshil and Blackstone), and Embassy’s REIT announcement. This signals strong interest from institutional and international investors. With India on track to become the world’s third-largest economy in the next five years—growing from $3 trillion to $5 trillion—global investors are eager to tap into this growth. Post-COVID, they are viewing India through a fresh perspective. Additionally, returns in India are highly attractive. While mature markets offer an IRR of 10-12%, India is delivering around 15%. The growing interest is undeniable.”

Thacker highlights the financial strength of the sector: “FDI inflow into the Indian hospitality sector is relatively limited. Moreover, overall FDI in India has been declining. Nevertheless, the enthusiasm shown by major hotel chains in expanding their footprints shows continued strong belief in the India growth story. It’s important to note that many Indian hospitality companies—especially asset-heavy chains—currently have very low levels of debt. In a study we conducted covering around 54,000 rooms, we found average gearing was just 12.5%. This low leverage, combined with strong cash positions, gives these companies significant capacity to absorb shocks and fund future expansion, which augurs well for the sector.”

Long-term resilience: Opportunities and adaptation

India’s hospitality industry stands at an inflection point. While exposed to global cost and sentiment volatility, its strong domestic fundamentals and long-term investment interest provide a foundation for resilience, say experts and industry insiders. Reports like HVS ANAROCK project only a mild slowdown, banking on domestic strength. Strategic focus on cost controls, growth in Tier-2 cities, and capturing the domestic market will be crucial to navigating uncertainties and ensuring continued growth.

Hotels, often buzzing with wedding banquets and corporate retreats, benefit from a robust 300-million-strong middle class, projected to reach 450 million by 2030. By blending caution with creativity and embracing innovation, India’s hotels are well-positioned to weather global turbulence, transforming challenges into opportunities.

Manav Thadani, Founder Chairman, Hotelivate, emphasises the sector’s domestic strength: “Post-COVID, the growth of India's tourism industry has been driven largely by domestic travel. The Government of India has made little effort to promote the 'Incredible India' campaign internationally, and as a result, the sector’s progress has been primarily fuelled by domestic demand. Meanwhile, the strength of the Indian economy has attracted a wave of new investors, particularly in the hospitality sector. Over the past three to four years, the hotel industry has become increasingly institutionalised. Today, there are eight to nine publicly listed hotel companies, many of which have attracted international institutional investment. Investment activity has notably accelerated in the past two to three years, as seen in the public listings of companies like SAMHI, Ventive, and Juniper Hotels. The only three companies that potentially could go for an IPO are OYO, Leela Hotels and Lalit. Possibly they will wait and watch.”

He adds, “In my 25-plus years of being in India, I have never seen this kind of rush to build new greenfield sites. We did a staggering 160-plus projects last year, despite turning away many, and most were for greenfield developments where we are seeing real movement.”

The industry is also demonstrating a strong capacity for adaptation. Hotels are increasingly embracing technology, with AI-driven pricing models and chatbots optimising rates and reducing operational costs. Local sourcing of food and beverages is on the rise, reducing reliance on pricier imports. Sustainability initiatives are gaining traction, leading to cost savings and enhancing the appeal of eco-conscious properties. Meanwhile, hotels are diversifying their offerings to meet evolving travel preferences, with wellness retreats and experiential tours gaining popularity.

Government initiatives to develop new tourism circuits and infrastructure further bolster the sector’s long-term prospects. Amid a global realignment of supply chains and investment priorities, India is poised to emerge as a key beneficiary, attracting long-term investment in tourism infrastructure, especially in Tier-2 cities and underserved leisure destinations.

Vijay Thacker, Partner & CEO, Crowe Advisory India and MD, Horwath HTL India, highlights the sector’s resilience: “If tariff levels, as initially announced by President Trump, remain elevated long term, they could cause significant global disruption. The extent, depth, and pace of recovery are hard to predict. However, India benefits from a strong domestic tourism sector, making it less reliant on international travel; even if global markets face pressure, domestic demand should keep the sector relatively resilient. If stock markets stay subdued for an extended period, discretionary spending—and by extension, leisure travel—could be affected. Yet, I do not expect a major long-term impact on Indian hospitality. Much of the new supply is concentrated in the mid-tier segment, spanning emerging leisure destinations, pilgrimage sites, and secondary and tertiary business cities.

Moreover, India remains significantly underserved in hotel room supply, providing a natural buffer. New demand drivers like sports, entertainment, and events are still in the early stages of development, suggesting strong future growth potential. India could also benefit from a shift in global manufacturing investments away from China, further strengthening its economy. Of course, if the US enters a recession, sectors like IT services could face pressure, indirectly affecting demand. But overall, given the strength of domestic tourism, the impact on the hospitality sector should be manageable.”

Lamba notes that the recent dip in hospitality stocks reflects cyclical investor sentiment, not structural weaknesses: “Long-term fundamentals remain strong, supported by robust domestic demand and growing travel from Tier-2, 3, and 4 cities.” While global economic headwinds and geopolitical tensions have led to a more cautious investment outlook, potentially slowing fresh inflows, he adds, “This environment may boost India’s appeal. Amid greater instability in many global markets, India’s macroeconomic resilience, strong domestic tourism, and investor-friendly policies position it as a stable and attractive market for long-term investment. As international players seek to diversify from more volatile or saturated regions, India’s hospitality sector, particularly in the economy and midscale segments and Tier-2/3 markets, stands to benefit. Barring a sharp escalation in global risks, we do not foresee significant disruptions to investor sentiment.”

Palmqvist observes that the sector’s expansion plans remain ambitious: “In some cases, slower growth could be healthier and more sustainable. India, like China before it, has some projects that frankly don’t seem fully viable for the next decade. Certain areas and product types might be overbuilt for current demand. So, a little recalibration isn't necessarily a bad thing.”

Thacker notes the investment dynamics: “Owners who have already committed funds—especially smaller, domestically funded players—are unlikely to pull back. However, large projects that depend on stock market performance, valuation gains, or inbound capital flows could see some delays or adjustments. That said, if new developments slow down, it would mean less additional supply, which could strengthen the performance of existing hotels.”

Here are some ways in which the Indian hospitality industry is likely to grow:

Opportunity in diversification: On the flip side, there is the possibility that companies and investors look to diversify away from China and hedge risks, and India may 
benefit as an alternative destination. This could lead to long-term investment gains in hospitality infrastructure, especially in emerging leisure and Tier-2 cities.

Domestic travel as a growth anchor: Crucially, India's hospitality sector is underpinned by strong domestic demand. With a 300-million-strong middle class, India’s travel appetite remains a powerful engine. Domestic air traffic soared to 13.1 million passengers in August 2024, up 7% year-on-year, per DGCA data, reflecting a growing willingness to explore. Tier-2 cities like Indore, Surat, and Coimbatore are emerging as tourism hubs, with Knight Frank India noting a 12% rise in hotel investments there since 2023.

JLL’s new analysis of the investment scenario reveals that 2024 saw approximately 25 deals, primarily involving operational properties in both business and leisure destinations. “What's particularly noteworthy is the significant shift towards Tier II and III cities, which accounted for nearly half of all hotel transactions. This trend has effectively broadened the industry's reach, bringing quality accommodations to previously underserved markets such as Amritsar, Mathura, Bikaner, and several others,” it states.

Unlike metro markets, these destinations rely less on volatile international arrivals, buffering the sector against global shocks. Nikhil Sharma, Managing Director & COO - South Asia, Radisson Hotel Group, emphasised this trend at a HICSA session: “Today, Radisson has a portfolio of 207 hotels including our pipeline. Notably, 50% of our properties are located in Tier 2, 3, and 4 cities—destinations like Saputara and Khopoli—which allow us to showcase our brand even in non-metro markets. We had a strong year in terms of signings—36 last year and already 20+ so far this year. As we look ahead, we’re focused on expanding not just our brand but the hospitality ecosystem in India through thoughtful scaling and impactful initiatives.”

The opportunity to attract inbound tourists: A weaker rupee, standing at 86.71 against the dollar in April 2025, positions India as a cost-competitive destination for budget travellers from Southeast Asia, the Middle East, and Africa, potentially mitigating the impact of a projected global tourism slowdown.

Trade dynamics offer further upside. If U.S. trade negotiations, hinted at by Foreign Minister S. Jaishankar, yield a favourable deal by July 2025, export sectors like textiles and electronics could rebound, restoring jobs and consumer confidence. HSBC estimates a 0.3% GDP boost from such an outcome, lifting discretionary spending on travel. India’s pivot as a manufacturing alternative to China—evident in Apple’s expanded iPhone production—could drive business travel to cities like Bengaluru and Chennai. CBRE India projects a 10% rise in corporate bookings in these hubs by 2026, as multinationals set up operations. Meanwhile, the RBI’s April 2025 rate cut to 6% eases borrowing costs, enabling hotels to fund expansions. Knight Frank forecasts 300,000 new rooms by 2030, with branded chains like Marriott and IHCL targeting Tier-2 growth to capture rising demand.

Adaptability is equally critical. Hotels are rapidly embracing technology to stay competitive. Deloitte reports a 20% surge in AI-driven pricing models, allowing chains like Lemon Tree to optimise rates in real-time. Chatbots now handle 25% of bookings industry-wide, cutting OTA commissions by 3-5%. Local sourcing is another game-changer: FHRAI notes a 15% increase in domestic F&B procurement, reducing reliance on costly imports like olive oil and coffee, which rose 20% in price. Sustainability initiatives—solar panels, water recycling—shave 5-7% off utility bills, according to HVS ANAROCK, boosting margins for mid-tier properties. Experiential offerings, from wellness retreats in Rishikesh to heritage tours in Rajasthan, are drawing 10% more bookings, per MakeMyTrip data, as hotels pivot to “staycation” trends.

Government support could further amplify these gains. The Ministry of Tourism’s push for 100 new tourism circuits and 50,000 skilled workers by 2027 aims to elevate India’s global appeal. If infrastructure projects roll out on schedule, accessibility will drive arrivals. The sector’s $50 billion revenue target by 2030 remains ambitious but achievable, provided trade stabilises.

Strategic repositioning: India as a beneficiary

Amid the global realignment of supply chains and investment priorities, India has the potential to emerge as a key beneficiary. As companies diversify beyond China and hedge against geopolitical risks, India may attract increased long-term investment in tourism infrastructure, particularly in Tier-2 cities and underserved leisure destinations.

At a HICSA 2025 session, Mohit Arora, Managing Director, Blackstone, highlighted the investor view: “I believe that global fund markets are increasingly recognising the potential of the Indian hospitality industry. While there might be short-term uncertainties, the underlying fundamentals suggest strong growth. Many comments in the Indian hospitality stock market indicate a level of stability. From an investor's standpoint, the recovery and increased interest in the hospitality sector, as well as related industries, present buying opportunities. Of course, there's a complete dislocation in the markets, and real estate and hospitality were among the biggest beneficiaries initially.”

Thacker offers an example of how India could gain as investment shifts from China: “With China pulling back from Boeing aircraft orders amid the trade war, Indian carriers waiting for deliveries could benefit, shortening their delivery timelines. So, while there are sectoral risks, net-net, given the size and momentum of India's economy, the overall outlook remains positive.”

Government initiatives like Dekho Apna Desh and the National Tourism Policy further enhance India’s appeal as an alternative growth market. The broader lesson is clear: hospitality mirrors India’s ability to navigate global storms. Hotels must innovate—embracing AI, local sourcing, and experiential packages—while policymakers push tourism incentives and trade diplomacy. Risks remain; a global recession could deepen the slowdown, hitting mid-tier players hardest.

Inbound tourist numbers remain sluggish, but global hospitality brands are making their way into India, drawn by its strong domestic market. “Global players are already in China. The elephant is just waking up and providing newer opportunities to global brands,” says Thadani. For now, India’s hotels stand at a crossroads. As markets sway and tariffs loom, the sector’s strength lies not just in the guests welcomed, but in resilience forged.