Indian Hospitality Sector: Resilience, Recovery & Recalibration
Executive Summary
India’s tourism and hospitality sector has evolved into a strategic pillar of economic growth, propelled by two decades of expansion and a rapid post-pandemic resurgence. From 1999 to 2019, International Tourist Arrivals (ITAs) rose from 2.5 million to 10.9 million (CAGR of 7.85%), Domestic Tourist Arrivals (DTAs) surged from 191 million to 2,321 million (CAGR of 13.79%), and foreign exchange earnings increased from ₹ 0.13 lakh crore to ₹ 2.12 lakh crore. This momentum, driven by rising business engagements in India, government-led campaigns, and rising disposable income, has set a strong foundation for the sector’s sustained growth.
The Covid-19 pandemic temporarily disrupted this trajectory, with occupancy rates plunging to ~35% in FY2021 and both DTAs and ITAs collapsing. However, recovery began in 2023, with the easing of lockdown restrictions. By FY2024, average national occupancy bounced back to 68%, RevPAR reached ₹ 8,055 (up from ₹ 4,630 in FY2021), and the sector contributed ₹21.15 lakh crore, 7.16% of the nominal GDP, supporting 46.5 million jobs. The projections for 2034 estimate a contribution of ₹43.25 lakh crore and 63 million jobs (WTTC).
This rebound has been fueled by pent-up domestic demand, global events, and targeted government intervention, making India the 8th largest tourist destination in 2025 (up from 39th in 2024, as per TTDI). Besides, the resurgence is driven by a combination of drivers such as changing travel patterns, including staycations, workcations, short-haul escapes amplified by social media influence, and aspirational spending among Millennials, Gen Z, and Gen Alpha. Notably, 27% of personal loan borrowers in H1CY2025 financed travel, up from 21% in 2023. Demand is also accelerating in Tier 2 and Tier 3 cities, supported by infrastructure upgrades and regional connectivity.
Going ahead, the growth trajectory is reinforced by supply-side capacity expansion with branded hotel inventory growing from 1,83,000 rooms in 2023, to 2,00,000 in 2025, and an additional 88,884 rooms being in the pipeline. Diverse segments such as spiritual tourism, medical travel, MICE, cruise tourism, and premium leisure are gaining traction. Government initiatives such as SWADESH 2.0, PRASHAD, SASCI, Heal in India, Cruise India Mission, alongside PPP initiatives for airports, heritage sites, and ropeways, are enhancing competitiveness. Nevertheless, challenges persist in last-mile connectivity, international branding, and balancing domestic tourism growth against rising outbound travel.
“With Vision 2047 aiming for 100 million international tourist arrivals annually, India stands at a pivotal juncture. Sustaining this growth will require coordinated government-industry action, continued infrastructure investment, and the preservation of cultural and natural heritage. ”
Introduction
The Indian tourism and hospitality industry is a dynamic and multifaceted sector, encompassing diverse offerings such as spiritual journeys, medical and wellness retreats, MICE (Meetings, Incentives, Conferences, and Exhibitions) events, cruise experiences, and rich cultural trails that vary across states. Over the past decade, the sector has consistently contributed around 5% of India’s GDP, with notable exceptions during FY 2021 and FY 2022, when contributions plunged to approximately 1.5% and 1.75%, respectively, due to COVID-19 restrictions. Encouragingly, the industry recovered strongly to its pre-pandemic level of 5% in FY2023, underscoring its resilience and growing recovery trajectory. According to WTTC estimates, the sector’s contribution to GDP was ₹ 21.15 lakh crore, 7.16% of the FY2024 GDP (at current prices) of ₹ 295 lakh crores, a significant jump from 5% reported earlier, and supported 46.5 million jobs. This is further expected to grow to ₹ 43.25 lakh crore by 2034, supporting 63 million jobs.
This growth momentum has been reinforced by the calibrated approach of the government towards supporting infrastructure growth and boosting spiritual and medical tourism in India, making it the 8th largest tourist destination in 2025, a substantial jump from the 39th rank in 2024 [as per the World Economic Forum’s Travel & Tourism Development Index (TTDI)].
However, despite the remarkable improvement in India’s global tourism ranking, the nation still needs to strengthen regional connectivity and an overall rise in International Tourist Arrivals (ITA) (including Foreign Tourist Arrivals (FTAs) and Non-Resident Indians (NRIs)) to meet the aspirational target of achieving 30.50 million international foreign travellers by 2028 from current levels of 17.90 million in 2024. On the Domestic Tourist Arrivals (DTAs) front, changing travel aspirations among Indian travellers toward international destinations have led to faster growth in outbound leisure travel compared to inbound leisure tourism. This trend could adversely impact India’s hospitality sector.
Having said this, the Indian Hotel Industry is in rapid expansion mode with key hotel chains aiming for an increase of 88,884 room inventory by FY2030. This is backed by average occupancy levels of 67%, increased Bleisure travels, destination weddings, staycation trend among youth, Meetings, Incentives, Conferences, & Exhibitions (MICE), and the government's focused approach on Medical and Spiritual Tourism in the FY2026 Budget announcement.
India’s Position in Global Tourism
- India’s global standing in tourism has seen remarkable improvement in recent years. As per TTDI, it has been ranked as the 8th largest tourist economy in 2025, a significant improvement from the 39th rank in 2024. The sharp upward trajectory underscores India's focused push on infrastructure, domestic tourism, digital services, and global event hosting.
- While the ranking in terms of tourist economy improved, India remains outside the global top 10 tourism markets in both inbound and outbound segments. In 2024, India recorded 18.89 million international tourist arrivals (FTAs & NRIs), compared to 80 million+ in France and Spain, placing it well below the top-performing countries.
- The Ministry of Tourism has set an ambitious target aligned with India’s Vision 2047, aiming to attract 100 million ITAs annually by 2047, with an interim milestone of 30.50 million by 2028. Bridging this gap from current levels of 17.90 million ITAs will require a multi-pronged approach towards better Infrastructure (road, airports, hygiene), better connectivity options, and a Public Private Partnerships (PPP) model for ropeways, cruise terminals, eco-tourism hubs etc.
This global positioning is not an isolated achievement; it is the result of decades of evolution in India’s hospitality landscape, shaped by policy initiatives, infrastructure investments, and shifting consumer trends. Understanding this journey provides context for the sector’s current resilience and its recalibration towards future growth.
Evolution of Hospitality Sector in India
The Indian hospitality sector, one of the most culturally rich and economically vital industries, has seen transformative growth over the decades. Starting with colonial-era icons like the Taj Mahal Palace (1903) and The Oberoi Grand (1934), the post-independence era saw the government-led expansion through ITDC. Further, the 1991 economic liberalisation was the real inflection point, allowing 100% FDI and ushering in global hotel giants like Marriott, Hilton, and Accor via management and franchise models. From April 2000 to March 2024, the cumulative FDI inflows stood at about USD 17.2 billion, which is about 2.54% of the total FDI inflow across all sectors during the period.
During FY2000 to FY2019, the sector witnessed a sustained Y-o-Y growth trajectory (interrupted only briefly by the 2008 Global Financial Crisis), due to the surge in International and Domestic Tourism led by the following reasons-
- Increase in FTA attributed to rising international trade, which enhanced business travel and global exposure to India, fostering stronger economic ties and cross-border mobility. This surge in commercial engagement complemented leisure tourism, boosting FTAs significantly.
- Government-led campaigns like Incredible India, better regional connectivity (UDAN), the Launch of the e-visa scheme, higher budget allocations for mid-scale hospitality brands, and making travel more accessible to India’s growing middle-class contributed to a surge in Domestic Tourist Arrivals (DTAs).
- Rising disposable income has enhanced the domestic population’s capacity to spend on leisure activities. The year-on-year increase in per-capita GDP indicates an improved standard of living, thereby higher allocation towards recreational and entertainment activities.
- “Bleisure” (Business + Leisure) travel emerged as a trend, especially in major urban hubs like Mumbai, Delhi, Bengaluru, and Hyderabad.
- A notable domestic demand driver had been the “Big Indian Wedding” economy, valued at $75 billion (as of 2025), which became a major revenue contributor for hotels across categories.
In response to the surge in tourism, India’s hotel industry expanded rapidly across segments and attracted travellers with competitive package offerings.
This steady growth trajectory faced its most severe disruption in modern history with the onset of the COVID-19 pandemic. The unprecedented global health crisis forced the sector into a period of extreme uncertainty, compelling operators to pause expansion plans, reassess business priorities, and prepare for a fundamentally altered travel environment. This period became a defining test of the industry’s resilience and adaptability, setting the stage for the recovery that followed.
Resilience and Recovery of the Sector
The COVID-19 pandemic brought India’s hospitality sector to a standstill almost overnight. As lockdowns froze travel and public gatherings, hotels and tourism businesses plunged into crisis. FTAs and DTAs declined 86% and 71%, respectively, during FY21, in comparison to FY19 levels. In response, the key indicators for the industry, such as occupancy levels, Average Rate (ARR), and Average Revenue per Available Room (RevPAR), declined by ~48%, 23% and 60%, respectively. The slippage in demand led to an approximate revenue loss of ₹ 90,000 crore to ₹ 1 lakh crore, resulting in cashflow mismatches and a halt to ongoing expansion projects. The sector focused upon cost rationalisation measures such as the adoption of digitization (contactless check-in, introduction of one-time use items, virtual menu) and workforce reskilling initiatives.
The Ministry of Tourism aided the sector by providing financial assistance in the form of the Emergency Credit Line Guarantee Scheme (ECLGS), a one-time debt-restructuring option through the Resolution Plan route, etc. The Government issued over two lakh guarantees amounting to ₹ 22,015 crore under the different phases of the scheme towards the travel and tourism (₹ 2,329 crore) and hospitality (₹ 19,687 crore) segments. Besides, the State Governments offered various tax waivers like property tax, excise license tax, fixed electricity bills, etc., to support the sector.
With the phased easing of lockdowns and the relaxation of travel restrictions, the hotel demand rebounded sharply as Occupancy levels rose from ~35% in FY21 to about 50% in FY22 and further to 66% FY23. This accelerated recovery vividly showcased the sector’s remarkable resilience and its ability to capitalise quickly on revived domestic and inbound travel. Furthermore, the Occupancy levels, ARR, and RevPAR surpassed the FY19 levels and reached an all-time high of 67.5%, ₹ 8,055 per room, and ₹ 5,439 per room, respectively, in FY2024.
The surge in demand was anchored by revenge travel (release of pent-up demand post-COVID), a rise in weddings, social events, and conferences, and the resumption of business travel across the country. While a rise in infrastructure development and government-led schemes to establish tourism destinations supported the sector’s resurgence, hotel chains simultaneously recalibrated their strategies to align with evolving consumer preferences, introducing flexible stay options, enhanced amenities such as co-working spaces, and private, personalized accommodations, including villas and staycation-friendly offerings.
Accelerated Expansion Plans
Buoyed by the strong rebound surpassing pre-COVID pandemic levels, sustained demand drivers, and robust government support for tourism and infrastructural development, India’s hotel industry is now poised for rapid expansion, as evidenced by record signings in 2024.
- According to JLL, 42,071 new branded hotel keys were signed (77% towards Tier II and Tier III cities) and 11,352 keys opened in 2024, with Tier II/III cities accounting for 50% of transactions. The number of greenfield projects surged in 2024 to ~28,281 keys in comparison to ~13,600 keys in 2023.
- As per Lodging Econometrics, India led the Asia-Pacific region in Q4FY2025 for hotels under development, with 693 projects comprising 88,884 rooms in the pipeline—reflecting a 19% year-on-year increase in projects and a 27% rise in room count. As of March 31, 2025, the country’s branded hotel room inventory stood at approximately 2,00,000 rooms, supported by significant expansion plans from major hotel chains in India, as follows.
| Major Hotel Chains | Current Inventory | Expected Addition |
|---|---|---|
| JW Marriot | 30,000 | 20,500 |
| Indian Hotel Company Ltd | 25,000 | 4,500 |
| ITC | 13,300 | 6,700 |
| Radisson Group | 14,000 | 8,600 |
| Hilton | 5,500 | 5,100 |
Demand drivers
1. Government support towards Tourism and Infrastructure Development:
- Budget FY2025-26 outlined measures to boost India’s tourism sector with a focus on infrastructure development, employment generation, and promotion of medical tourism. Some of the key highlights include:
- Upgradation of 50 top tourist destinations across India with State partnerships.
- Allocation of ₹2,541 crore to enhance infrastructure, skill development, and travel facilitation.
- Expansion of UDAN to connect 120 new destinations over the next 10 years.
- Promotion of Medical and Wellness tourism with private sector partnerships.
- Special focus on destinations linked to Lord Buddha’s life and other religious heritage sites.
- Organizing intensive skill-development programmes for youth, including the Institutes of Hospitality Management.
- Introducing streamlined e-visa facilities along with visa-fee waivers for certain tourist groups. Currently, e-visas are available to citizens from 172 countries under 13 sub-categories, up from 167 countries under 9 categories as of December 2024.
- The government, besides, has ongoing initiatives like Incredible India 2.0, Swadesh Darshan 2.0, PRASHAD Scheme, Dekho Apna Desh Campaign, etc., to boost tourism in India.
- Under the Swadesh Darshan scheme, launched towards the development of tourism facilities across the nation, 76 projects at a cost of ₹5,292 crores were sanctioned, of which 73 are completed as on December 31, 2024. Further, 29 new projects at a cost of ₹644 crore have been sanctioned under Swadesh Darshan 2.0 as on December 31, 2024.
- Under the National Mission on Pilgrimage Rejuvenation and Spiritual Heritage Augmentation Drive (PRASHAD), 50 destinations have been converted into 46 sanctioned projects at a total cost of ₹1,621 crore, of which 27 sites are physically complete and 19 are under implementation. Further, 29 new sites have been identified for development as on December 31, 2024.
- Central Financial Assistance scheme towards the development of tourist areas. According to the latest report by the Ministry of Tourism, Government of India, a total of 40 projects across 23 states have been sanctioned under the ‘Special Assistance to States for Capital Investment (SASCI) – Development of Iconic Tourist Centres to Global Scale’ scheme for the financial year 2024–25, involving an outlay of ₹3,296 crore. The initiative aims to undertake the holistic development of iconic tourist destinations, along with their branding and promotion at a global level.
2. Resurgence in Tier 2/Tier 3 cities, rising geographical diversification:
While Tier 1 has had better occupancy levels led by higher Tourist Arrivals compared to Tier 2 and Tier 3 cities, there has been a resurgence in demand in the latter in the post-pandemic era. Increased interest in spiritual tourism, rising MICE events, and an emerging trend among the youth to explore unexplored destinations have strengthened pricing power in these markets. This has translated into higher ARR and RevPAR, while occupancy levels have remained broadly stable.
| Tier | Occupancy | Average Rate | RevPAR | |||
|---|---|---|---|---|---|---|
| FY23 | FY24 | FY23 | FY24 | FY23 | FY24 | |
| Tier 1 | 71.50% | 73.60% | ₹7,719 | ₹9,276 | ₹5,516 | ₹6,828 |
| Tier 2 | 65.40% | 66.00% | ₹5,874 | ₹6,682 | ₹3,838 | ₹4,409 |
| Tier 3 | 57.10% | 57.40% | ₹6,260 | ₹6,829 | ₹3,571 | ₹3,917 |
3. Domestic Leisure Travel - Changing customer preferences:
- In the wake of COVID‑19, corporate employers worldwide rapidly adopted hybrid and fully remote models. As of 2023–24, roughly one‑third of all white‑collar working days occur outside the office - more than triple the pre‑pandemic norm - and employers increasingly list “remote or hybrid flexibility” as a standard job offer. This significant shift to a “work‑from‑anywhere” mindset has catalyzed an upswing in staycations, workcations, and local weekend escapes as employees weave leisure into work life.
- Concurrently, Millennials and Gen Z are redefining leisure travel. A majority now take three or more short leisure trips per year, often choosing local staycations, scenic small‑town retreats (“town‑sizing”), live cultural or music events, and offbeat travel experiences. The demand is further expected to surge in the coming years as most of the working population will comprise Millennials/Gen Z.
- The rise of social media culture has deeply influenced travel aspirations, especially among Gen Z, Millennials, and the emerging Gen Alpha cohort. The desire to curate and broadcast experiences on platforms like Instagram and TikTok has created subtle yet powerful peer pressure to "travel to be seen." This has significantly contributed to experience-driven spending, often prioritizing travel over traditional savings. Many now view travel as a marker of personal identity, lifestyle, and social capital. As a result, discretionary spending on leisure travel has surged, occasionally even funded through personal loans.
- The internet penetration has increased from 7% of the total population in 2010 to 55.3% in February 2025.
- Social Media identities stood at 491 million as of February 2025, 35% of the total population, further projected to reach 1.30 billion in 2029.
- According to Paisabazaar’s report titled “How India Travels Using Holiday Loans (vol 2.0)” in July 2025, 27% of personal loan borrowers in the first half of CY2025 used the funds to finance travel, up from 21% in 2023, making holidays the second-most common reason for taking a personal loan. Notably, 71% of these borrowers came from Tier-2 and Tier-3 cities, reflecting the rising aspiration among non-metro consumers to explore the world, even if on credit.
4. Tourism across different sectors:
- Spiritual Travel: India’s spiritual tourism landscape is transforming, scaling from traditional pilgrimage to globally-marketed, immersive, faith-integrated experiences. Due to infrastructural upgradations and access to better quality and comfortable services in top pilgrimage cities like Varanasi, Ayodhya, Ujjain, etc., there has been a surge in pilgrim visitors. Besides, the successful execution of the few big events has reinforced the faith of the visitors in the nation to host large religious gatherings.
- As per the Ministry of Tourism’s latest data, the number of pilgrim visitors increased from 677 million in 2021 to 1439 million in 2022, generating revenue of ₹ 1.34 lakh crore, almost 100% up from ₹ 0.65 lakh crore in 2021.
- Ram Mandir’s inauguration attracted over 135 million domestic visitors to Ayodhya. Till June 2025, 550 million visitors have visited the temple since the inauguration, as per the State government estimates.
- Maha Kumbh Mela in Prayagraj drew 660 million visitors in just 45 days, generating total trade over ₹ 2 lakh crore and creating nearly 800,000 jobs, which was a massive boost to the Tourism and Hospitality sector in India.
- Medical Tourism:India’s Medical Value Travel (MVT), valued at USD 2.89 billion in 2020, is projected to reach USD 13.42 billion by 2026, driven by increasing foreign patient arrivals seeking high-quality and cost-effective treatment (Source: PIB). The government has announced the “Heal in India” initiative in partnership with the private sector, to enhance India’s position as a premier global healthcare destination for medical expertise as well as wellness systems like Ayurveda and Yoga. Key schemes and support mechanisms under the initiatives are:
- Ayush Visa (2022): The Ministry of Home Affairs introduced a special visa category for international patients seeking Ayurveda, Yoga, Siddha, Unani, and Homeopathy treatments, streamlining access under the broader “Heal in India” initiative.
- One Step MVT (Medical Value Travel) Portal: Centralized platform for international patients to book hospitals, travel, and post-treatment care.
- NABH Accreditation Incentives: The Government promotes hospitals to get accredited by the National Accreditation Board for Hospitals (NABH) to ensure global quality standards and attract international patients.
- National Medical &Wellness Tourism Board: A board formed to coordinate between various government ministries and industry stakeholders to create a unified MVT strategy
- Heritage Tourism: Heritage tourism was valued at USD 19.9 billion in 2024, expected to reach USD 27.1 billion by 203311 as the government aims to prioritise the development of sites associated with pilgrimage and heritage under the PRASHAD Scheme (Details mentioned above).
5. Rising MICE Industry: India’s Meetings, Incentives, Conferences, & Exhibitions (MICE) industry has grown 40%, post-pandemic, and is projected to grow at 13.2% CAGR from USD 49.4 billion in 2024 to USD 103.7 billion by 2030, as per IESA. It further notes that more than 35,000 corporate events are hosted annually in India, a direct contributor to hotel demand in India.
6. Focus on Cruise Tourism: The government has launched a dedicated Cruise India Mission targeting 3 main segments - Ocean and Harbour Cruise Segment, River and Inland Cruise Segment, Island Cruise Segment in September 2024 with a target to increase passengers from 0.50 million in 2024 to 1 million passengers by 2029 and double the volume of cruise calls from 254 in 2024 to 500 by 2030 and 1,100 by 2047.
Challenges in the Sector
- Improving Destination Infrastructure: While marquee destinations like Agra, Jaipur, Delhi etc., attract visitors, a lack of high-quality infrastructure (roads, airports, hygiene) dampens the tourist experience in other regions. The ₹20,000 crore destination development pipelines (FY26 Budget) must be implemented swiftly to transform Tier-II and spiritual circuits into global-grade destinations.
- Enhanced Connectivity: India is expanding its Vande Bharat trains, UDAN regional flights, and new expressways, which can significantly cut travel times and would make underexplored regions accessible.
- Global Branding and Ease of Access: Unlike countries like Thailand or the UAE, India underinvests in international tourism marketing. Targeted global campaigns, along with faster e-visa processing, could attract higher-spending tourists from Europe, East Asia, and the U.S.
- Private Sector Participation: PPP models for ropeways, cruise terminals, and eco-tourism hubs can unlock capital and innovation. While initiatives like the Cruise Bharat Mission and ropeway expansion mark positive beginnings, they must be scaled up significantly to achieve a meaningful impact.
- Need for Quick turnaround in government approvals: As the industry is in capex mode with 693 projects under development, the strategic partnership between the State and Central government in providing clearances related to environment, land, etc., would support the timely completion of projects without cost overruns.
- Rising trend of foreign trips compared to Domestic destinations amongst the Millennials and Gen Z: With visa-free or visa-on-arrival access and competitively priced flights-plus-hotel packages, destinations such as Singapore, Thailand, Vietnam, and Dubai are increasingly outshining domestic getaways for many Indian travellers. According to a McKinsey report, India’s outbound travel market has grown from 13 million trips in 2022 to a staggering 80 million by 2024, positioning the country alongside the USA and China. In contrast, the domestic visitor number grew only from 1731 million in 2022 to 2600 million visitors in 2024 (Source: Ministry of Tourism), a divergence that signals how the expanding demand for foreign holidays is gradually eroding the appetite for domestic arrivals.
Conclusion & Way Forward:
The Indian tourism and hospitality sector has firmly moved beyond being a leisure-driven industry to become a core driver of GDP growth, employment generation, and global soft power. Post-pandemic recovery, powered by pent-up travel appetite, domestic demand, and targeted government programs such as Swadesh Darshan 2.0, PRASHAD, SASCI, and “Heal in India”, has restored momentum with FY2024 contributing ~22 lakh crore (~7% of the GDP) and supporting over 46 million jobs.
To sustain this trajectory, the sector must focus on five strategic levers:
- Infrastructure Modernization & Connectivity: Expanding airport, rail, and road networks, upgrading iconic and heritage tourist destinations, and improving last-mile connectivity.
- Diversified Offerings: Boosting high-potential niches like medical tourism, spiritual circuits, MICE, cruises, and experience-led travel for new-age customers.
- Technology Integration & Digital Marketing: Leveraging AI, and large-scale globally benchmarked marketing campaigns to position India as a year-round, world-class destination.
- Public-Private Synergy: Align central/state policies with private sector innovation, scale PPP models for airports, and heritage sites with MSMEs participation.
- Sustainability & Skill Development: Embedding green tourism practices, a responsible tourism framework, and adequate investment into workforce upskilling.