The supply of luxury hotels in India is expected to remain tight due to several significant barriers, hindering new developments in the luxury hospitality sector. These barriers include limited land availability, extensive regulation, restrictive zoning policies, high capital costs, and long project gestation periods.
Despite these constraints, demand for luxury hotel rooms is rapidly increasing, driven by rising disposable incomes and a shift in consumer preferences toward premium experiences. This surge in demand has fueled strong growth in Average Daily Rates (ADR) and occupancy levels within the luxury hospitality segment. According to HVS ANAROCK Research, the luxury hospitality segment recorded an ADR growth of 5.7% CAGR over the financial years 2014-24, outpacing the broader hospitality industry's growth of 3.1% CAGR.
Looking ahead, the imbalance between supply and demand is expected to further boost the segment's Revenue Per Available Room (RevPAR). Total demand for luxury rooms is projected to grow at a CAGR of 10.6% between FY24 and FY28E, while the supply of luxury hotel rooms is expected to increase by only 5.9% during the same period. This disparity is likely to drive RevPAR to approximately 1.5 times the FY24 levels by FY28E.
India's rapid economic growth is creating a significant opportunity for the luxury hotel market. The number of high- and upper-middle-income households is expected to rise exponentially, reaching 200 million by 2030, a threefold increase from the 69 million recorded in 2018. With India's GDP projected to nearly double to USD 6.8 trillion by 2030, the country is solidifying its position as one of the world's fastest-growing major economies.
Several factors are contributing to the increasing demand for luxury experiences in India. Domestic tourism is surging, as more Indians explore their own country. Business travel is also on the rise, driven by India's growing economy. Furthermore, there's a demographic shift with millennials and Gen Z travelers, who have high disposable incomes and a preference for experiential travel, becoming key drivers of demand.
To capitalize on these trends, luxury hotels are focusing on providing unique and personalized experiences. This includes customized packages, curated itineraries, and immersive activities. Digital transformation is also playing a crucial role, with luxury hotels embracing technologies to enhance guest experiences, streamline operations, and optimize marketing strategies.
However, the Indian luxury hotel industry faces certain challenges. High operational costs, including staffing, maintenance, and infrastructure, can pose difficulties for hoteliers. Intense competition among numerous domestic and international players requires constant innovation and differentiation. The lack of standardization policies in the luxury hospitality segment also presents a challenge.
Despite these challenges, the Indian luxury hotel market is poised for sustained growth. Policy support for tourism infrastructure and streamlined clearances will further accelerate growth, positioning India as a world-class luxury destination. Strategic diversification into niche segments, such as boutique heritage, desert camps, and eco-retreats, alongside strong brand-experience ecosystems, will enable hoteliers to capture premium yields. The Indian hotel industry is projected to grow from US$281.8 billion in 2025 to US$541.7 billion by 2030, at a 14.0% CAGR.
