Summer is here, schools are closing and the season of travel is upon us. Which means one sector is gearing up for a busy few months: luxury hotels. [What is the definition of a luxury hotel?] India is becoming a top destination for luxury and ultra luxury hotel companies, driven by a surge in domestic travel and the growing affluence of the Indian middle and upper classes.
The sector’s growth and what’s driving it
India’s luxury hotel market is set for robust expansion, with its value projected to grow from $2.99 billion in 2025 to $4.83 billion by 2030, at a compound annual growth rate (CAGR) of 10.06% during this period. The sector’s growth is expected to be fuelled by economic expansion, rising disposable incomes, and a surge in tourism, largely driven by domestic demand.
According to JLL trends data, India had the second-fastest-growing high-net-worth individual (HNWI) population in the world in 2022, expanding by 10.5%, with projections indicating a nearly 60% increase over the next five years. This rise in wealth has led to a significant shift in travel patterns. Where foreign tourists dominated the ultra-luxury segment earlier, today, domestic travellers account for nearly 70% of high-end hotel guests.
Several factors are propelling the luxury hotel market forward:
- Domestic travel: With greater spending power, Indian travellers are increasingly opting for high-end staycations and premium travel experiences.
- Aviation industry growth: Expanded air connectivity and competitive airline pricing are making luxury travel more accessible.
- Rising foreign tourism: India’s cultural and wellness tourism appeal continues to attract global travellers.
- Eased visa regulations: Simplified visa policies are encouraging more inbound tourism.
- Tax incentives: The GST Council’s reduction of luxury hotel tax rates from 28% to 18% (for rooms ranging from INR 2500 to INR 7499 per night) is expected to further boost demand (room tariffs of INR 7500 and above will be taxed at 28%).
Key players
Several major players dominate the Indian luxury hotel landscape. These include:
- IHCL: The Indian Hotels Company Limited, operating under the ‘Taj’ brand, IHCL is India’s largest hospitality group, managing a vast portfolio of luxury properties, business hotels, resorts, and more across the country.
- ITC: A significant player with over 140 properties across India, Nepal, and Sri Lanka. In January 2025, ITC Hotels was valued at approximately $4.2 billion during its trading debut following a spin-off from its parent company, ITC Limited.
- EIH Limited: Oberoi Hotels & Resort is another homegrown Indian player, known foremost as a luxury chain, managing some of India’s most prestigious properties.
- Leela Palaces, Hotels and Resorts: A luxury hospitality group with a presence in major Indian cities.
- Chalet Hotels Limited: A part of the K Raheja Corp group, Chalet owns high-end properties, primarily managed by Marriott.
- Marriott International: A strong global player in the Indian market, Marriott has a presence with brands like JW Marriott, The Ritz-Carlton, St. Regis, Westin, Marriott Suites, Courtyard etc.
- Hyatt: In India, Hyatt offers luxury accommodations under brands like Park Hyatt and Grand Hyatt.
- Hilton: Hilton operates hotels in several cities in India, under Hilton, Doubletree and the luxurious Conrad brands.
Luxury hotels make up 17% of India’s total branded hospitality market, accounting for approximately 29,000 rooms nationwide, according to data from a report by hospitality advisory firm HVS Anarock. The segment has been dominated by Indian groups like IHCL, Oberoi, and ITC; but in the last decade and a half the entry and growth of global chains like Marriott, Hilton, and Hyatt has led to more competition.
Who owns and operates the hotels?
While hotels may be named after big brand names, not all of them actually own the vast properties, buildings, and resorts they operate. The various ownership models are as follows:
- Owned and operated: Companies like IHCL, ITC, and Oberoi own and manage many of their properties, which gives them direct control over operations, service standards, and brand identity.
- Asset-light model: In this model, international brands (like Marriott and Hyatt) do not own the properties, but instead, enter into management contracts with existing hotel property owners.
- Franchise agreements: Some brands offer franchise models, where existing property owners operate hotels under an international brand’s name while adhering to set guidelines.
- Leasing: This is an arrangement where a hotel owner leases their property to a hotel operator. The operator runs the hotel and business while the owner receives a fixed form of rental income from the property.
How partnerships work
Each player in the partnership has a specific role and function.
The hotel owners are the ones who invest capital, own the property, and oversee infrastructure maintenance. The hotel operators get down to brass tacks and handle daily management, staffing, marketing, reservations, and brand compliance. The franchisees, on the other hand, operate under a global brand or larger brand, and their job is to maintain the property independently while complying with the standards and quality set by the brand.
The existence of these kinds of partnerships has helped the luxury hotel segment grow: luxury hotel operators are able to open more properties and expand their presence without pumping in a lot of capital into land and infrastructure; while Indian property owners get to take advantage of the brand name and benefit from their operational expertise.
How does the revenue stack up?
The relationship between hotel owners and operators is typically governed by management agreements or franchise models.
With management contracts, hotel owners enter into agreements with international brands for operational expertise. These contracts usually include:
- Base management fee: Typically 2-4% of the hotel’s gross revenue is paid by the property owner to the hotel management company (the brand or operator) for their operational and admin services
- Incentive fee: Ranges between 6-12% of the hotel’s gross operating profit, aligning the operator’s interests with profitability.
In the franchise model, owners pay fees to use a brand’s name while handling operations independently. Fees include:
- Initial franchise fee: A one-time payment for brand affiliation.
- Ongoing royalty fees: A percentage of room revenue (usually 5-10%) for continued use of the brand’s name and services.
COVID stagnation and pricing trends
The COVID-19 pandemic caused travel restrictions and lockdowns, which severely impacted the hotel industry. There was a decline in occupancy rates and average daily rates (ADR). However, the market has rebounded strongly.
Estimates show occupancy rates as follows
2020: 32.2%
2021: 49.6%
2022: 67.3%
2023: 67.43%
And, after hitting record highs in 2024, the sector is set to grow even further in 2025. According to a report from ICRA, revenues are expected to grow by 7-9% YoY in FY2024-25 and 6-8% YoY in FY26, over the high base of FY24.
Where does Mahindra Holidays fit in?
There’s another homegrown player that fits into the luxury vacation category: Mahindra Holidays & Resorts India Limited (MHRIL), which operates under the ‘Club Mahindra’ brand. While it is not a luxury hotel chain per se, it plays a significant role in India’s hospitality landscape.
Unlike hotel chains that rely on nightly bookings, Mahindra Holidays operates on a membership model, offering families “vacation ownership.” The company has announced investments of Rs 1,800 crore to add 2,100 rooms over the next 5-6 years, reflecting its focus on leisure travel and long-term vacation planning. While not in direct competition with luxury hotel brands, Mahindra Holidays taps into the high-end leisure market by offering its members premium resort experiences.
Poised for more growth
The Indian luxury hotel market is clearly poised for sustained growth, especially now that the market has bounced back from the pandemic.
Major players like Taj, Oberoi, Leela, Marriott, and Chalet continue to dominate through a mix of owned properties, management contracts, and franchise agreements. Meanwhile, Mahindra Holidays, though operating in a different segment, does hold its own, contributing significantly to India’s premium hospitality landscape.
As the sector expands, strategic partnerships between hotel owners and operators will remain key to scaling operations, maintaining service quality, and maximising profitability in India’s ever-growing luxury hospitality market.