Background
- Investing in hospitality real estate can be attractive due to its potential for high returns, portfolio diversification, and the ability to generate consistent income through rental income and asset appreciation, especially in a growing tourism sector.
- India’s tourism story is unfolding like never before – significant investments, transformative infrastructure, increasing purchasing power and an aspirational domestic tourist wanting to connect, explore, and experience.
Reasons one should evaluate investment in Hospitality
- Growth Drivers:
- Growing domestic tourism backed by infrastructure improvements are amongst the key reasons driving the growth of hospitality industry in India.
- In the year 2024, India recorded close to 2 billion trips of which 99 per cent of the trips were on account of domestic tourists while a mere 1 per cent of the trips were attributed to foreign tourists . The momentum in domestic tourism has led to increased tourist activities across established tourist destinations and led to emergence of new tourist destinations.
- The Swadesh Darshan Scheme being promoted by the Government of India is with the focus to develop newer tourist destinations or strengthen the existing destinations.
- Infrastructure developments - expansion of airports, expressways connecting major cities are reducing the travel time and paving way to lesser-known travel destinations near established locations or tier I cities. With the Chalo India Initiative by the Government of India, the country is expected to witness growth in foreign tourists as well.
- Revenue Potential:
- Hospitality assets, like hotels and resorts, can generate higher revenue per square foot compared to traditional real estate, making them a lucrative investment.
- The hospitality market in India has grown phenomenally in the last 5 years. ICRA projects a revenue growth of 6-8 per cent for the Indian hospitality industry in FY2026, driven by rising Average Room Rate (ARR) and sustained demand from domestic tourism, business travel, and Meetings, Incentives, Conferences, and Exhibitions (MICE) events.
- The ability to adjust room rates and service charges allows businesses to maintain margins and enhance asset value, even when operational costs rise.
- Properties in prime locations or with unique offerings often yield higher occupancy rates and premium pricing, leading to substantial returns.
- Portfolio Diversification:
- Investing in hospitality real estate offers a unique opportunity to diversify your portfolio, which can weather market fluctuations and provide stability in various economic conditions.
- Further, with the emergence of serviced residences / villas, the investment required to develop a resort can further be minimized.
- Consistent Income and Asset Appreciation:
- Hospitality properties generate income through bookings and events, offering a steady stream of revenue. Hospitality assets not only generate income but also appreciate over time, making them an effective hedge against inflation.
- Rental income from a hotel / resort property not only secures the asset but also provides a higher profit than other comparable asset classes.
- Stability and Long-Term Growth:
- The hospitality industry exhibits strong long-term growth potential, as India continues to be one of the world's fastest-growing economies, the demand for both luxury and mid-range hotel services is expected to rise.
- The travel market is India is no longer confined to leisure travel. The hospitality industry is supported by increased leisure, business, and MICE tourism. Emergence of wellness tourism and religious tourism has paved the way for hotel or resort development at newer locations.
- With more people traveling for business and leisure, the hospitality industry stands to gain significantly.
The hospitality sector in India is undergoing a transition. Domestic and international tourism growth, Government initiatives, and reforms promise transformative expansion in the Indian hospitality and tourism industry. The hospitality growth story is not just restricted to tier I cities or the established tourist locations. India, today, is witnessing development of hospitality projects in tier II cities as well as emerging locations. The travel patterns of Indians have expanded significantly over the past three to five years with emergence of wellness tourism, gastronomic tourism, concert-based tourism, and pilgrimage tourism. Sustainability, technology and cultural experiences are some of the factors that will drive development of hotel or resort projects in the 1 – 3-year horizon.
About Meraqi's Hospitality Real Estate Services
Meraqi’s Hospitality Real Estate Services’ team advises the owners and investors, by evaluating the market, regulation, and financial feasibility of a hospitality product, identifying the appropriate development mix, property valuation, operator selection, and contract negotiations. We also assist the owners, developers and investors in invest or divest the property, operator tie-up and investment structuring.
