By HNR News Staff Reporter
India’s hotel-development map is being redrawn.
For decades, the country’s branded hotel sector concentrated largely on major commercial and tourism centres such as Mumbai, Delhi, Bengaluru and Chennai. New development is now moving decisively into smaller cities, pilgrimage destinations and regional business hubs.
The numbers make the shift difficult to dismiss. India recorded 51,647 branded hotel-room signings across 424 properties in 2025, according to property consultancy JLL. That was 23% more rooms than in 2024, and 71% of them were in Tier 2 and Tier 3 cities.
Capital followed. Hotel investment reached approximately $567 million in 2025, up 67% from $340 million a year earlier. Smaller cities accounted for 40% of transaction volume and most new signings, JLL reported.
The expansion builds on a record year in 2024, when JLL counted 42,071 signed rooms and 11,352 openings. Tier 2 and Tier 3 cities captured 77% of rooms signed that year.
A separate analysis by HVS ANAROCK supports the broader conclusion, even though it uses different city classifications. It found that Tier 3 and Tier 4 markets accounted for 46% of rooms signed in 2024, while Tier 2 cities took another 28%. Only 26% were in Tier 1 cities.
The precise percentages vary because research firms do not always define city tiers in the same way. But both datasets point in the same direction: roughly three-quarters of India’s new branded hotel development is taking place outside its largest urban markets.
Connectivity opens new markets
India’s expanding transportation network is one reason hotel operators can venture farther afield.
The country’s airport network more than doubled from 74 airports in 2014 to 159 in 2024, according to the Indian government. The Tourism Ministry’s 2024 data compendium also credited the regional-connectivity programme with adding 517 air routes.
New airports do not automatically create viable hotel markets, but they reduce one of the biggest obstacles confronting smaller destinations: the time and uncertainty involved in reaching them.
Ayodhya offers an unusually clear illustration. Its airport opened at the end of 2023 as the city prepared for the consecration of the Ram temple. In the first six months of 2024, it handled more than 482,000 passengers, based on figures supplied to India’s Parliament.
Hotel companies responded to the city’s religious-tourism potential. Ayodhya and the surrounding pilgrimage circuit attracted branded openings and development plans from groups including Indian Hotels Company, Marriott, Radisson and Wyndham.
Guwahati provides a second model. Rather than serving one attraction, the city functions as the aviation and commercial gateway to northeast India. Its airport handled 6.16 million passengers in the year ended March 2025, even though the existing terminal’s stated capacity was only 2 million. A new terminal subsequently increased annual capacity to 13.1 million.
At the same time, Assam officials said 11 luxury hotels were in the pipeline in and around Guwahati, including Marriott projects near the airport and Taj-branded developments in a planned aerocity. The scale of the proposed supply suggests developers are betting on continued growth in business, leisure and regional transit demand—not simply current room requirements.
Amritsar illustrates both the opportunity and the risk. Its airport handled a record 3.43 million passengers in 2024, and Marriott opened a dual-branded complex in the city in 2025. Hilton also signed a Hampton hotel near the airport.
Passenger traffic then fell 8.2% in 2025, affected by winter fog and restrictions involving Pakistani airspace. The reversal is a reminder that regional travel markets can be volatile even when their long-term trajectory appears favourable.
Domestic travellers drive the economics
Better access matters because a large pool of potential guests already exists.
India recorded 2.51 billion domestic tourist visits in 2023, 45% more than in 2022, according to the Tourism Ministry’s data compendium. Uttar Pradesh alone received 478.5 million visits, while Tamil Nadu recorded 286 million.
Not all those visits require paid accommodation, and the government’s measure counts trips rather than unique travellers. Nevertheless, its scale helps explain why hotel developers are pursuing pilgrimage centres, wedding destinations, industrial cities and regional capitals.
The demand is also broader than leisure tourism. Smaller cities increasingly host corporate travel, manufacturing investment, medical visits, government business, weddings and meetings. These sources can provide the weekday and year-round occupancy that a hotel depending solely on seasonal tourists may lack.
India’s branded supply remains relatively limited, leaving room for operators to convert demand currently served by independent hotels and informal accommodation. For travellers, a recognised hotel flag promises more consistent standards and easier online booking. For owners, it brings distribution, loyalty programmes and operating expertise.
An asset-light expansion
The change in development model is nearly as important as the change in geography.
Management contracts accounted for 81% of the branded rooms signed in 2024, while franchises represented 14%, according to JLL. Under these structures, a local developer or investor typically owns the property while a hotel company supplies its brand, booking system and operating platform.
That permits large hotel groups to enter numerous smaller markets without financing and owning every building. It also allows local landowners, family businesses and developers to participate in the sector with an established brand.
Lower land and development costs can make smaller-city projects attractive, particularly in the midscale segment. That helps explain why many new properties are more compact and moderately priced than the full-service hotels historically associated with international brands in India.
The strategy still carries execution risk. A signed management agreement is not the same as an operating hotel. Projects can be delayed by financing problems, approvals, construction costs or weak local demand. Some announced hotels will be reconfigured and some may never open.
Rapid development can also produce local oversupply. A market able to support two branded properties may struggle if six arrive together, particularly when demand depends on a new air route, a single industrial project or a seasonal pilgrimage calendar.
India’s hotel expansion is therefore not simply a story of airports producing hotels. Connectivity is an enabler within a larger structural change: domestic travel is growing, branded accommodation remains underrepresented, regional economies are becoming more important and hotel companies have found less capital-intensive ways to expand.
The strongest evidence is not that every newly connected city will become a successful hotel market. It is that India’s hotel industry no longer needs a city to be a major metropolis before considering it investable.
