Luxury hotels dominate India’s hospitality investment growth in 2025: JLL
Tier II and III cities account for 40% of transaction volume as luxury and upscale assets attract strong institutional investor interest.
Indian hotel transactions crossed USD 520 million in Q1 2026, up by 58% compared to USD 117 million transacted during Q1 of 2025. (AI Image)
India witnessed healthy traction in hotel investments, clocking investments of around USD 567 million across 28 deals in 2025, witnessing a growth of 67% from USD 340 million in 2024. India’s continued investment growth in hotels can be attributed to increased investor confidence towards the growth of tourism infrastructure in the country and the underlying strength of the Indian hotel sector across various market segments.
In terms of investment contributors, Institutional Capital/Private Equity led the transactions at 35%, followed by HNIs, family offices and private hotel owners at 27%, listed hotel companies at 25%, real estate developers at 8% and owner-operator at 5%.
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.
“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.
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.
Strong operational assets and premium positioning lead market activity amid geographic expansion
In terms of asset class, hotels that were under operation at the time of transaction accounted for 69% share by number of transactions, while under-construction/ not operational hotels accounted for 18%, whereas land deals (including land on lease) contributed 13%. By property tiers, luxury segment led transactions with a share of 42%, followed by upscale segment with 41%. Remaining tiers by transaction share were upper-upscale with 9%, midscale with 6% and economy segment with 2%.
A total of 51,647 keys across 424 hotels were signed for in 2025, registering a growth of 23% year-on-year. By geography, organised hotels in Tier 2 and 3 cities accounted for 71% of total signings by key count, highlighting increasing penetration of organised hotels into these markets. Overall, management contracts continued to witness growth from 81% in 2024 to 84% in 2025. Franchise agreements remained stable at 14%. Lease/ Revenue-share contracts witnessed a decline from 5% share to 2%. Hotel operators continue to favour asset-light models that allow them to expand their footprint rapidly while minimising capital investment and maximising returns from these investments.
Total greenfield pipeline crossed 33,170 keys in 2025 which is an increase of 17% over the previous year’s record transaction pipeline.
Hospitality developments with key counts exceeding 250 also saw increased traction as compared to last year with 29 such signings taking place in 2025 as against 21 in 2024. Till date, large hotels (>250 keys) have been largely restricted to major gateway and secondary cities such as Mumbai, Bengaluru, Hyderabad, Pune and Delhi NCR. However, in recent years these hotels have also started coming up in high-growth potential markets such as Guwahati, Visakhapatnam, Indore, and Pushkar.
India Hotel Investment Outlook for 2026: Robust momentum balanced by supply & geopolitical concerns
Indian hotel transactions crossed USD 520 million in Q1 2026, up by 58% compared to USD 117 million transacted during Q1 of 2025. Some of the notable transactions include Warburg Pincus buying into Fleur Hotels (subsidiary of Lemon Tree Hotels), committing USD 107 million towards the acquisition of around 100 hotels. Other notable investments during the quarter include acquisitions of operating hotels, monetisation of land parcels and platform level consolidations.
Looking forward, numerous tailwinds are expected to drive investments through 2026. Large levels of liquidity within listed hotel companies as well as expectations of newer hotel operators listing on capital markets looking to raise funds for expansion is expected to keep transaction volumes buoyant. These factors combined with Huntlease and Private Equity funds looking to deploy capital into hotel portfolios is expected to keep investments flowing into Indian hotels. Several land monetisation opportunities at airports and upcoming government auctions/ auctions planned at important micro markets such as Yashobhoomi (IICC), Neopolis Hyderabad, Fintech City Chennai, Jewar Airport will receive a boost with supportive government policies. Budget 2027 with focus on tourism has announced creation of 15 destinations around archaeological sites and development of multimodal connectivity hubs to improve passenger amenities and unlock demand. Tourism development would provide an important catalyst for several hotel markets to expand further.
Goa witnessed significant conversions from independent hotels and un-branded properties into organised hotel chains. With improved connectivity through addition of more air routes and road/rail/water transport infrastructure, Goa will continue to witness traction from being developed as India’s most favourite holiday destination and looked at as a year-round destination outside peak season.
While domestic tourism continues to drive traction for hotel transactions, investors should watch out for the following trends. Decreasing availability of quality tradeable hotels continues to remain a cause of concern as India hotels witness strong operational performance that is giving owners reasons enough to hold on to their best assets. This, in turn, would push up valuations but may impact deal volume if quality hotels continue to remain elusive. Geopolitical tensions could impact international tourist arrivals and global stock markets thus impacting investor risk appetite. However, most investments cater to domestic tourism and thus could see less of an impact.
A clear shift towards platform/company level transactions indicate maturing of the hotel market with development of meaningful synergies that comes with platform deals or building scale via strategic partnerships/joint ventures at the entity level rather than individual asset transactions. Platform deals, while offering higher valuations and helping with scale, also drive consolidation within the sector.
India’s hotel investment market will continue to attract capital through the remainder of the year driven by a host of factors such as diverse sources of capital, increase penetration of hotel chains and development into newer markets such as Tier 2 and 3 cities. Infrastructure led government initiatives, development around airports and steady growth in domestic tourism will continue to aid hotel development across India. While these traction points bode well for hotels in India, investors should tread carefully while looking at investments due to the low availability of quality hotels as well as geopolitical tensions.
