India’s hotel industry continues to record growth in key performance indicators, but the gains remain concentrated in its largest metropolitan markets even as the next wave of hotel development shifts towards smaller cities and towns. The latest annual Opportunities & Trends Report by hospitality consultancy Hotelivate-Savills highlights this growing divergence, with nearly half of the proposed branded hotel room supply concentrated in Tier III markets, where occupancy levels remain considerably lower than in the country’s leading metros.
At the national level, average daily rate (ADR) grew 6.4% to Rs 8,962, while revenue per available room (RevPAR) increased 6.2% to Rs 6,099.
Mumbai, New Delhi, Bengaluru and Hyderabad, the country’s four largest markets by room revenue, continue to exert a disproportionate influence on national performance. Together, they account for approximately 27% of nationwide hotel supply and recorded ADR growth of 10.2% and RevPAR growth of 9.7%, exceeding the respective national growth rates of 6.4% and 6.2%.
Bengaluru led RevPAR growth at 14.8%, followed by Hyderabad at 13.2% and New Delhi at 10.9%. Mumbai recorded a more measured increase of 3.2%. New Delhi also overtook Mumbai in RevPAR terms, reversing the position recorded in the previous year.
However, growth in both supply and demand moderated during the year. Available room nights increased by 5.8%, compared with 10.4% in the previous year, while occupied room nights grew 5.6%, against 11.8% previously. Demand marginally trailed supply for the first time since 2020/21, although the difference was only 0.2 percentage points.
The report notes that both supply and demand growth have moderated for the first time in several years, with their growth rates now nearly aligned. While national performance indicators remain positive, the underlying figures reveal significant differences between established hotel markets and emerging destinations.
The difference is equally evident in occupancy levels. More than 90% of hotels in Mumbai, Hyderabad, Bengaluru and New Delhi recorded occupancies of 60% or higher, while nearly three out of four achieved occupancy above 70%. Outside these four markets, only 55% of hotels recorded occupancy above 60%, while 37% crossed the 70% threshold.
The comparison by market maturity reinforces the trend. In Tier I cities, more than 69% of hotel supply operates within the 70–90% occupancy range. By contrast, over half of the hotel supply in Tier II and Tier III cities remains concentrated in the 40–60% occupancy band. The report cautions that the volume of proposed supply in these emerging markets means that improvements in hotel performance may not translate into a substantial shift towards higher occupancy levels in the short to medium term.
Against this backdrop, the development pipeline points to a significant geographical rebalancing of India’s branded hotel industry. Against 2,09,180 existing branded rooms, approximately 1,61,000 rooms have been proposed, of which nearly 1,17,000 are classified as being in active development. The proposed pipeline is equivalent to roughly 77% of existing branded inventory, representing the largest relative commitment in more than a decade.
Nearly 58% of the nationwide pipeline, or 93,261 rooms, is concentrated in “Other Cities”. If these projects materialise, the share of these markets in India’s branded hotel inventory could increase from 35% currently to 45% by 2030/31. By market tier, nearly half of proposed rooms are in Tier III cities, around 30% in Tier II markets and approximately 20% in Tier I cities. This means that almost four out of every five proposed rooms are located outside the largest hotel markets.
The scale of the pipeline relative to existing inventory is particularly significant in some emerging destinations. Tirupati has 3,728 proposed rooms against an existing branded inventory of 782, equivalent to approximately 477% of its current base. Varanasi follows with 3,670 proposed rooms against 831 existing rooms, or around 442% of its current inventory.
Established and larger markets are also preparing for substantial additions. Jaipur has 6,684 proposed rooms against an existing inventory of 8,501, while Lucknow has 3,570 proposed rooms against 2,730 existing rooms. The report notes that percentage growth and absolute additions offer different perspectives: the former indicates how dramatically competition could change in a market, while the latter highlights the volume of demand required to absorb incoming supply.
Growth is expected to be particularly pronounced in several markets beyond the established metros. Navi Mumbai’s branded inventory is projected to increase by 225%, while Lucknow and Dehradun are expected to grow by 131% and 116%, respectively. Amritsar is projected to record 93% growth. By comparison, New Delhi, Kochi and Kolkata are expected to expand more gradually, with projected growth of 19%, 20% and 21%, respectively.
More than 75% of the proposed pipeline is positioned in the midmarket, upper-midmarket, upscale and upper-upscale segments, broadly reflecting the concentration of future development outside established markets. The pipeline is also concentrated in North India, followed by West India, with these two zones accounting for close to 70% of proposed rooms. International brands account for 47% of proposed rooms, while Indian-origin brands account for 53%.
The report’s findings underline the need to assess emerging hotel markets individually rather than treating the projected expansion of branded inventory as a uniform growth opportunity. With occupancy levels in many Tier II and Tier III markets still concentrated in the 40–60% range, the ability of local demand to absorb additional rooms will be an important consideration for developers and operators.
As hotel development gathers pace beyond the major metros, careful feasibility assessment will remain essential to ensure that investment decisions, product design, positioning and brand choice are aligned with local demand.