Tuesday, 6 October 2026
India’s hotel market is entering a new investment cycle, supported by rapidly expanding domestic travel, rising room rates and the spread of branded accommodation beyond the country’s largest cities. Hotel transactions are increasing and institutional investors have become more active, but capital is not following the industry’s geographical expansion at the same speed. The emerging divide is between where hotel operators see future demand and where investors are currently most comfortable owning the underlying real estate.
Domestic travel provides a powerful foundation for the sector. India recorded approximately 4.29 billion domestic tourist visits in 2025, an increase of 45.6% from the previous year. International travel followed a different trajectory. International tourist arrivals, which include both foreign visitors and non-resident Indians, reached around 20.1 million in 2025, slightly below 2024. Foreign tourist arrivals alone declined to approximately 9.15 million. India’s current hotel expansion is therefore being supported primarily by the scale and growth of its domestic travel market rather than depending on a complete recovery in overseas tourism.
Hotel operators are responding with aggressive expansion. More than 51,600 branded hotel rooms were signed across 424 agreements during 2025, with approximately 71% of those rooms located in Tier-II and Tier-III cities. The expansion reaches well beyond traditional business centres and includes leisure destinations, pilgrimage locations, industrial cities, airport corridors and emerging regional commercial hubs. Other industry research similarly shows that the majority of newly signed branded rooms are now being planned outside India’s Tier-I markets.
Investment capital is growing quickly but remains more concentrated. Hotel transactions reached approximately $567 million across 28 deals in 2025, up 67% from the previous year. Institutional and private-equity investors represented the largest individual buyer group, accounting for around 35% of transaction value. Momentum continued into 2026, with approximately $185 million of hotel transactions recorded during the first quarter, 58% higher than in the equivalent period a year earlier. JLL expects annual hotel investment volumes could approach $1 billion by 2028 if the market continues to deepen.
The composition of transactions also reveals where investors are most comfortable taking risk. Operational hotels accounted for approximately 69% of 2025 investment volume, while properties under construction represented around 18% and land about 13%. Luxury and upscale hotels together attracted roughly 83% of transaction value. Investors are therefore concentrating heavily on established or relatively advanced assets with visible operating performance rather than taking development exposure across the entire hotel pipeline.
The geographical difference is even more striking. Although Tier-II and Tier-III cities accounted for around 71% of branded rooms signed in 2025, they received only about 40% of hotel investment transaction value. Tier-I markets continued to capture approximately 60% of capital. Hotel companies can enter a new city relatively quickly through management or franchise agreements without purchasing the property, while institutional investors acquiring the real estate need clear ownership, reliable financial reporting, sufficient scale, established operating performance and a credible future exit. This allows hotel brands to move into emerging destinations considerably faster than property capital.
Another constraint is the availability of hotels that investors can actually acquire. Strong trading conditions can encourage owners of successful properties to retain them, limiting the number of institutional-quality assets coming to market. India’s fragmented ownership structure can further reduce the investable pool, particularly where smaller properties lack the financial records, governance standards or ownership structures expected by institutional buyers. Development and operating requirements also vary between states and cities, adding another layer of due diligence for investors entering less familiar markets.
India’s next hotel investment cycle may therefore depend less on whether capital is available and more on whether the property market can produce enough suitable assets for that capital to buy. Tourism demand and hotel brands are already moving deep into regional India, while institutional ownership remains concentrated in a smaller universe of premium and established properties. If more hotels in Tier-II and Tier-III markets mature into professionally operated, transparent and tradeable assets, institutional investment could begin to follow the geographical transformation already taking place across India’s hospitality industry.
Source: © CIJ.World India Research & Analysis Team
