India records USD 567 million in hotel investments in 2025, up 67% year-on-year
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India’s hospitality sector demonstrated exceptional momentum in 2025, with hotel investments reaching approximately USD 567 million across 28 transactions, a remarkable 67% increase from the USD 340 million recorded in 2024. This surge reflects robust investor confidence in India’s tourism infrastructure and the sector’s fundamental strength across multiple market tiers.
Diverse capital sources drive transaction activity
The investment landscape revealed a sophisticated diversification of capital sources. Institutional Capital and Private Equity firms led transaction activity at 35% of total volume, followed by High Net-worth Individuals (HNIs), family offices, and private hotel owners (27%), listed hotel companies (25%), real estate developers (8%), and owner-operators (5%). This balanced investor composition demonstrates the sector’s appeal across diverse investment philosophies and risk profiles.
Tier II and III cities emerge as growth engines
Tier II and III cities emerged as significant growth engines, capturing approximately 40% of total transaction volume, momentum sustained from the previous year. These markets featured premium assets including luxury resorts in Rishikesh, upper-upscale properties in Goa, and upscale to midscale hotels across emerging urban centers such as Ludhiana, Nashik, Vadodara, Udaipur, and Lonavala.
Industry leaders highlight market momentum
“India’s hotel investment market is reflecting a clear step-up in both investor confidence and market depth, with rising transaction activity supported by a broader mix of institutional and domestic capital. What is particularly encouraging is the continued expansion beyond gateway cities, with Tier II and III markets steadily evolving into more mature, investment-grade destinations backed by improving operating performance and scalability. This shift is meaningfully expanding the investable universe and enabling more strategic capital deployment across geographies. The momentum has carried strongly into 2026, with a robust start to the year underscoring sustained capital appetite. Beyond volumes, we are seeing increasing sophistication in how capital is being deployed, through platform-led strategies and institutional partnerships, signaling a more mature and organized investment landscape. At the same time, strong asset performance has introduced a degree of supply-side discipline, with high-quality hotels being tightly held, making available opportunities more selective and highly sought after,” said Gaurav Sharma, Managing Director, Hotels, India & Senior Director, Hotels Capital Markets, Asia.
“Looking ahead, a supportive policy environment, including land monetization initiatives and tourism-led infrastructure development, is expected to unlock new avenues for investment. While external uncertainties remain a factor to watch, the underlying drivers, resilient domestic demand, infrastructure expansion, and diversified capital sources, provide a strong foundation for continued growth. We expect this to translate into higher transaction activity through the year, with more assets coming to market and increased participation from institutional investors, reinforcing India’s position as a compelling hospitality investment destination,” he added.
Strong operational assets lead market activity
Beyond traditional hotel transactions, 2025 witnessed substantial institutional capital deployment for consolidation and strategic partnerships totaling approximately USD 125 million. The operational performance backdrop supports continued investment activity. Strong hotel performance has created scarcity in tradeable assets as owners increasingly retain high-performing properties. This dynamic has positioned available premium hotels as rare opportunities commanding significant investor attention and premium valuations.
Premium hotel segments dominate transaction volumes
Transaction composition revealed strategic asset preferences. Operational hotels represented 69% of total transaction volume, with under-construction or non-operational properties accounting for 18%, and land transactions including leases comprising 13%. This distribution reflects investor preference for income-producing assets with established operational track records.
Segment analysis showed the luxury category commanding the highest transaction volume share at 42%, followed closely by upscale properties at 41%, indicating strong demand for premium positioning. Upper-upscale (9%), midscale (6%), and economy (2%) segments completed the market distribution.
Branded hotel signings continue to rise
Branded hotel signings reached 51,647 keys across 424 hotels in 2025—a 23% increase over the previous year. Significantly, 71% of these signings by key count were concentrated in Tier 2 and 3 cities, demonstrating the geographic expansion of organized hospitality into India’s emerging urban centers.
Management contracts continued their dominance, increasing from 81% in 2024 to 84% in 2025, while franchise agreements held steady at 14%. Lease and revenue-share arrangements declined from 5% to 2%, reflecting operator preferences for asset-light growth models that optimize returns while minimizing capital requirements.
Greenfield developments and large-format hotels gain momentum
Greenfield development activity reached approximately 33,170 keys in 2025, surpassing 2024’s record by 17%. This sustained pipeline expansion signals developer confidence in long-term sector fundamentals despite broader economic uncertainties.
Large-format hotels of 250+ keys gained momentum, with 29 signings in 2025 compared to 21 the previous year. While concentrated in Tier 1 markets including Mumbai, Bengaluru, Hyderabad, Pune, and Delhi, this format expanded into growing markets such as Guwahati, Visakhapatnam, Indore, and Pushkar, demonstrating geographic diversification of premium supply.
Hospitality investment momentum continues into 2026
First quarter 2026 results underscore accelerating momentum, with transaction volumes reaching approximately USD 185 million—a 58% increase from Q1 2025’s USD 117 million. Notable activity includes Warburg Pincus acquiring a 41% stake in Fleur Hotels (Lemon Tree Hotels subsidiary) with a USD 107 million commitment for portfolio expansion, alongside operating hotels, land monetization transactions, and platform consolidation acquisitions.
Government initiatives and infrastructure expansion support growth
Multiple structural catalysts are expected to support hotel investment activity through 2026. Strong liquidity among listed hotel companies, anticipated capital market entries, and growing interest from Institutional Capital and Private Equity funds are creating favourable conditions for transaction growth.
Government initiatives, including airport land monetisation and auctions in strategic micro-markets such as Yashobhoomi (IICC), Neopolis, Fintech City, and Jewar Airport, are further boosting opportunities. The FY 2027 tourism-focused budget is also expected to support expansion through new cultural destination development and transport infrastructure upgrades.
Goa and emerging markets strengthen hospitality expansion
Goa exemplifies successful conversion dynamics, consistently demonstrating high rates of independent and unbranded properties transitioning into established brand portfolios. Enhanced connectivity through expanded air services and improved road, rail, and water infrastructure positions Goa for continued growth as India’s premier leisure market and year-round tourism destination. Branded hotel openings in 2025 totaled approximately 8,990 keys across 103 hotels, with 64% of keys concentrated in Tier 2 and 3 cities, indicating balanced supply expansion across market segments.
