Hilton and Marriott are leading a push by global hotel chains into India's smaller cities, investing in and opening mid-range lodging to accommodate a surge in domestic travel and cater to the country's price-conscious tourists.
Marriott earlier this year took an undisclosed minority stake in Mumbai-based Concept Hospitality, which will work with the global hotel group to expand its room count in India to 50,000 within five years from about 30,000 currently. Hilton wants to grow its footprint in India 10-fold in the next decade from the 60 hotels it has in operation or under construction.
Growing wealth among a newly minted middle class and government spending on new highways and airports have spurred wanderlust in the world's most populous country, but the number of quality accommodations is failing to keep up with demand, said industry experts and executives.
"People are prioritising travel over other expenses and really there's a clear emergence of an experience economy," Rajeev Menon, Marriott's president for Asia-Pacific excluding greater China, told the Financial Times. "The ability to scale up and add new hotels across the country is immense."
Domestic tourism spending soared to about $200bn in 2024 from $80bn in 2013, according to Capital Economics. Operators are rushing to cater to the rising number of middle-class Indians travelling for religious festivals, holidays and destination weddings, in addition to business travellers.
Markets in smaller cities and towns are underserved compared with the metropolises of New Delhi, Mumbai and Bengaluru. When Coldplay performed two shows in Ahmedabad in January, a run on rooms boosted prices as much as fivefold, according to a study by pricing software company Sciative Solutions.
India has only 138 branded hotel rooms per million people, trailing China's more than 1,500, according to hospitality advisory group HVS Anarock.
As a result, domestic brands such as Tata's Taj and ITC Hotels and global chains are adding hundreds of hotels in India's smaller cities. "These are the epicentres because tier-one cities are largely saturated," said Anuj Upadhyay, lead hotels analyst at Investec Capital Services in Mumbai.
Karan Khanna, director at Mumbai-based brokerage Ambit Capital, estimated the number of branded hotel rooms in India would rise from 200,000 to 300,000 by 2029, with supply "heavily skewed" to locations outside India's main cities. More than half of new hotel contracts signed last year were for mid-range accommodations, according to HVS Anarock.
"We are undersupplied in terms of rooms," said Priya Paul, chief executive of The Park Hotels, which listed last year. The boutique hospitality group operates 35 hotels in India and wants to raise its room count by nearly half in the next two years.
The growth comes as US President Donald Trump's aggressive border enforcement and trade policies have hit global travel and led to cloudy earnings forecasts from airlines and hospitality groups. India, however, is a "bright spot", said Alan Watts, Hilton's Asia-Pacific president.
In addition to building more mid-range accommodations, Hilton is boosting its high-end offerings after announcing plans for a Waldorf Astoria near Delhi's airport in June, with further luxury openings expected in Jaipur and potentially Goa and Mumbai.
The rush to build is likely to test hotel chains' management capabilities in a country notorious for patchy standards in mid-market and budget accommodations. Horror stories about poor cleanliness, food hygiene and haphazard quality are staple gripes among travellers to India.
Many cities and more remote locations lack sufficient pools of trained workers, said Investec's Upadhyay, and franchise operators in lower-tier markets have been known to cut corners, putting brands at "reputational risk".
"If you go to those cities today [for travel], you really are rolling the dice," said Hilton's Watts. "There's a huge opportunity. People just crave consistency."