The demand for hotel rooms in Delhi is outpacing supply, leading to a surge in prices, particularly for IHCL hotels. The Indian Hotels Company (IHCL), backed by the Tata group, reported a 2% increase in hotel occupancy rates in the Delhi-NCR region during the first quarter of the financial year 2025, reaching an impressive 82%. Simultaneously, revenue per available room (RevPAR) jumped by 10% to ₹8,200, a testament to the strong demand.
This upward trend in hotel prices is attributed to a combination of factors. The nationwide slowdown in new hotel openings, coupled with robust domestic travel, is creating a tight supply situation. Analysts predict that these factors will likely keep room rates elevated in the upcoming travel seasons.
While India has a relatively low penetration of branded hotel rooms, the limited supply is expected to persist in the near future. From April to June, the Indian hotel market saw the addition of only 2,900 rooms, a modest 1.4% increase, bringing the total to 191,000 rooms. Major cities like Delhi, Mumbai, Bengaluru, and Chennai experienced a collective increase of just 0.6% in room counts during this period.
Challenges such as extreme heatwaves and a decline in corporate events due to elections have slowed growth in the hotel sector. However, industry experts and analysts remain optimistic about a rebound in the coming months, driven by the upcoming busy wedding and corporate event seasons.
The hotel industry is also witnessing a shift in vacation planning. The decision-making process for leisure trips has shrunk from 3-4 weeks to a mere 3-5 days, thanks to extended weekends and the increasing popularity of last-minute booking platforms. As the peak travel season begins in December, there is an anticipation of a surge in bookings.
Looking ahead, approximately 50,000 new branded hotel rooms are projected to enter the market by the end of FY27, representing an annual growth rate of 8%. However, this growth is still below the forecasted demand growth of 10%, according to Hotelivate projections.
India’s branded hotel room penetration per thousand people currently stands at a meager 0.1, significantly lower than the United States at 16.3 and China at 3.2. This disparity highlights the substantial potential for growth in the Indian hotel sector.
