According to a new report, HVS Anarock HOPE 2025 Special, shared exclusively withMint, over 47,500 hotel rooms were signed across more than 486 properties in 2024—marking a record year for expansion. Notably, 74% of these signings were in tier-II, III and IV cities, up from 65% in 2019.
As economic activity shifts and connectivity improves, hotel chains are aggressively expanding into these cities. Lower development costs and rising demand for branded accommodations make these emerging markets attractive to developers eager to tap into India’s next wave of hospitality growth.
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Factors driving this demand include the fact that nearly 45% of the country’s urban population lives in tier-II and III cities, and 40% of the entire total population residing in urban areas. By 2036, the country will have approximately 600 million people living in urban areas, increasing 31% from 2011. Government support and improved infrastructure are set to push tourism beyond tier I cities, according to the report.
Upcoming cities for new hotel developments include Sonmarg, Rudraprayag, Vrindavan, Bodhgaya, Ambaji, Omkareshwar, Yadagirigutta, Amravati and Guruvayur, among others.
Niche tourism
The surge, the report said, is driven by niche tourism segments—including faith-based, adventure, sports, culinary, medical and wellness tourism—alongside regular business from MICE (meetings, incentives, conferences and exhibitions) and destination weddings segments. The wedding industry ranks second globally in size. About 600 million people are aged 18-35, likely leading to increased weddings.
India’s number of HNWIs (high-net-worth individuals—those with an asset value of $1 million or more) is also expected to grow by nearly 107% to reach 1.65 million by fiscal year 2027 (FY27), all factors expected to contribute to an already higher consumption of hotel rooms.
In 2025, about 70% of business hotels that the report surveyed are expected to increase their average daily rates (ADR)—the revenue earned per occupied room per day—to increase their income. Over 77% of hotels expect this ADR to rise, while 22% anticipate no change, and just 1% predict a decline. Leisure hotels, however, focus on filling more rooms, with most prioritizing higher occupancy, as their rates are typically higher than city or business hotels.
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In 2024, hotels had an occupancy rate of 63-65%, growing 1-3 percentage points over 2023 but still slightly shy of the pre-pandemic figures. Average room rates (ARR) across categories increased to ₹7,000-9,000 in 2024, rising by 7-9% compared to the previous year. This growth shows prices are stabilizing after sharp price hikes in 2022-23. Revenue per available room (RevPAR), which measures how much a hotel earns for each room, also increased steadily throughout 2024, mainly due to higher room rates.
“This growth can be attributed to strong domestic demand and the gradual resurgence of international travel. While international travellers are expected to grow from 9.2 million in 2023 to 15 million in 2030, domestic travellers are expected to more than double from 2.5 billion in 2023 to 5.2 billion by the same year,” said Mandeep S. Lamba, president and chief executive officer (South Asia) HVS Anarock.
Leading in occupancy
In the first part of 2024, Mumbai led in occupancy, boosted by corporate travel and major events like the Indian Premier League (IPL) and the Kala Ghoda Arts Festival. ARR crossed ₹8,500, a 30% rise from 2019 and 9% higher than 2023, with Goa recording the highest at over ₹12,500. RevPAR also increased by 11% from 2023 to ₹5,700- ₹5,900, with Mumbai also leading this growth.
The second quarter of the year was marred by the general election that slowed demand, bringing occupancy down to 61-63%—a drop of 1-3 percentage points compared to both 2023 and 2019. The last quarter of the calendar year saw occupancy rise to 65-67%, led by Mumbai, Ahmedabad and Goa, which exceeded 70%.
New Delhi also saw strong ARR growth, while Bengaluru and parts of southern India lagged with around 62-64% occupancy. Mumbai’s ARR crossed ₹13,000 due to seasonal demand, pushing RevPAR past ₹9,000 in key markets like Goa, New Delhi and Mumbai, marking a strong end to the year.
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