Breaking Barriers in Indian Hospitality: The Path to 70% Occupancy and Beyond in 2025

The Indian hospitality industry has recorded one of its best performances to date in FY23-24, achieving a national occupancy rate of 67.5%—a decade-high—paired with an average daily rate (ADR) of INR 8,055, and an impressive revenue per available room (RevPAR) of INR 5,439. However, breaching the 70% occupancy threshold remains a difficult target, according to Achin Khanna, managing partner at Hotelivate, who highlights findings from the latest Indian Hospitality Opportunities & Challenges annual report. Khanna explains that unlike markets such as Dubai or Singapore, India’s occupancy challenges stem from deeply rooted weekday-weekend fluctuations in both urban and leisure markets. Here, we delve into the current landscape and future prospects of India’s hotel industry as it navigates an evolving market.

Overcoming the 70% Occupancy Challenge

While Indian hotels have set records, a nationwide occupancy rate of 70% is proving difficult due to inherent demand patterns across both urban and leisure destinations. Khanna emphasizes that India remains a “weekday-weekend market,” where leisure properties experience low weekday demand and urban properties face weekend dips. This structural limitation poses a natural cap on occupancy, even in high-performing markets. Although certain segments achieve 75-80% occupancy, surpassing 70% on a national scale remains elusive. Addressing this requires creative solutions to balance demand patterns and adapt to India’s diverse tourism landscape.

Luxury ADRs: Can They Be Sustained?

In recent years, luxury leisure hotels in India have posted record-breaking ADRs, at times exceeding USD 400-500. While these rates reflect an increase in demand for upscale accommodations, Khanna cautions that sustaining such pricing may be challenging. Given the dominance of domestic travelers, continued price sensitivity may lead to rate adjustments, especially as international travel recovers. With domestic travelers showing strong interest in high-quality accommodations but hesitant to commit to premium rates long-term, luxury and upper-upscale hotels may face pressure to moderate prices as supply increases and more travelers opt for international alternatives.

Rate Dynamics and the Influence of Corporate Bookings

Corporate rate negotiations through Request for Proposal (RFP) cycles are another factor anticipated to influence pricing in urban markets like Delhi, Mumbai, Hyderabad, and Bengaluru. The post-pandemic surge in business travel initially drove hotels to benefit from higher retail rates, as corporate contracts had yet to resume fully. However, as corporate RFPs regain momentum, hotels in these urban centers are likely to adjust to more competitive corporate rates. Although limited new supply in city centers will support occupancy, the resulting rate corrections could temper overall revenue growth in these urban markets.

Occupancy and Rates in USD Terms: A New Benchmark?

In Indian rupee terms, an ADR of INR 8,000 seems promising; however, when translated to USD, these rates are still below the USD 100 mark, a gap widened by recent rupee depreciation. For instance, in 2007, when Indian ADR rates neared INR 8,000, the rupee stood at INR 40 to the dollar. Today, the exchange rate of INR 84 to the dollar leaves Indian ADRs undervalued by global standards, despite record-breaking performance domestically. This disparity underscores the need for a more sustainable rate structure that can withstand currency fluctuations while maintaining appeal to both domestic and international travelers.

Future Outlook for Indian Hospitality

Despite challenges, the Indian hospitality sector remains on a positive growth trajectory for FY2025, albeit with a tempered outlook. Khanna anticipates marginal growth over FY24, with factors such as the Indian general elections and an extended monsoon season exerting only limited influence. Growth is also expected in popular destinations like Goa, where charter business is likely to see a revival this winter, along with a gradual increase in international inbound travel, which remains vital for upscale hotels in India. Although international guests still represent a relatively small portion of the market, they play a crucial role in sustaining higher-tier segments such as luxury and upper-upscale hotels.

Segment-Specific Trends: Stability and Moderation in 2025

As occupancy remains strong across sectors, segment-specific trends reveal diverse growth patterns. The luxury and upper-upscale sectors are likely to see stabilization or modest rate corrections, balancing demand with the recent surge in supply. Midscale and upper-midscale hotels may experience ongoing price pressures due to new supply, particularly in secondary and tertiary markets. However, Khanna remains optimistic, highlighting that as long as external shocks—such as geopolitical instability or another pandemic—are avoided, the market will remain in a positive upcycle.

Conclusion: Charting a Path Beyond 70%

The Indian hospitality industry’s robust performance in FY23-24 signals strong fundamentals, but achieving 70% occupancy on a nationwide basis will require innovative solutions to bridge the weekday-weekend demand gap. For hoteliers, adaptability will be key, especially as price adjustments loom in response to evolving domestic and international traveler behaviors. While high single-digit growth is more realistic than the rapid expansion seen in recent years, India’s hospitality market stands ready to capture new opportunities and optimize performance across diverse segments.