- Report: India’s hotels continue to expand as development economics shift.
- More than 50K branded hotel rooms were signed in 2025.
- Demand remained stable across the country despite market disruptions.
INDIA’S HOTEL SECTOR continues to expand even as development economics shift, according to Hotelivate-Savills. Stable construction costs are being offset by rising fit-out expenses and longer project timelines, reshaping investment returns.
Hotelivate-Savills’ report “Building Smarter: Construction Cost Insights 2025” found nationwide occupancy held at 67 to 68 percent over the past year. Average room rates rose 8 to 9 percent year over year to $96.8 to $97.8. Goa and Lucknow saw softer performance due to new supply.
More than 50,000 branded hotel rooms were signed in 2025, while the development pipeline crossed 120,000 rooms or more than half of India’s existing branded inventory, the report said. This reflects investor confidence and a development cycle not seen in more than a decade.
“Hotelivate’s contribution draws on a survey of 597 hotels across 150 cities, representing approximately 40 percent of India’s organized hotel inventory,” said Megha Tuli, Hotelivate-Savills partner and co-founder. “The findings point to a sector where building construction costs have converged across positioning tiers, while fit-out and financing costs are the key differentiators.”
Monsoons in parts of Himachal Pradesh, Sikkim and Uttarakhand, along with geopolitical tensions in mid-2025, briefly affected operations, the study said. However, demand remained stable across the country.
The cost factor
Demand remains strong, supply is rising, and core construction costs are stable in dollar terms, Hotelivate-Savills said. However, fit-out costs, larger room footprints and longer development cycles are increasingly shaping project economics in India’s hospitality sector. Core building costs across hotel categories range between $46.8 and $51.9 per square foot, indicating hotel construction has become commoditized with limited variation across segments and geographies.
“The rapid rise of the leisure segment, the non-linear economics of scale and the significant variation in development costs by city tier all underscore a market that rewards disciplined planning and penalizes assumptions carried forward from one project to the next,” Tuli said.
Mechanical, electrical and plumbing systems, along with furniture, fixtures and equipment, start at about $32.4 per square foot in budget hotels and rise in premium and luxury categories. In higher tiers, costs are driven less by structural complexity and more by brand standards, design and guest requirements.
The average cost per hotel key, excluding land, stands at about $146,000, while the median is about $111,800, the report said. The cost ratio between budget and luxury segments remains about 6.2 times, compared with 6.5 times in 2023, suggesting the relative cost hierarchy has not changed.
On a per-square-foot basis, costs rise about 1.6 times across categories, from $95.9 to $156.1. The wider per-room gap is driven by space, as luxury hotels allocate about 3.2 times more area per key than budget properties. As a result, room size, not construction complexity, remains the main driver of investment differences across segments.
Execution timelines remain a constraint. The average hotel project now takes around 43 months to complete, longer than global benchmarks. Delays are linked to approvals, financing gaps, legal disputes and execution issues, while land acquisition remains a key factor in cost escalation and delivery risk.
Separately, a recent CBRE report found that India’s listed hotel operators are projected to add more than 70,000 keys by 2030 to capture growth potential. The sector is shifting from post-pandemic recovery to structural maturity, marked by expansion and pricing stability.
