India's hotel industry saw remarkable growth in the first half of 2024, with hotel investments reaching US$ 93 million, according to the latest report by the JLL Hotel Investment Trends. The report indicates a strong momentum in the sector, fueled by favorable macroeconomic conditions and rising investor interest. Listed hotel companies led the transactions, making up 44% of the total investment volume, followed by owner-operators (30%) and high-net-worth individuals (HNIs), family offices, and private hotel owners at 26%.

Transaction Growth and Projections:

One of the key highlights from the report is the forecasted hotel investment volumes for the entire year 2024, which are expected to reach US$ 413 million, a 22% increase from 2023. This surge in investment indicates growing confidence in India's hotel sector, with operational hotels accounting for a significant 72% of transaction volume in H1 2024. The upscale hotel segment dominated the investment landscape, capturing 44% of the total transaction volume, followed by the mid-scale segment at 31%, luxury at 23%, and the economy segment at 3%.

Additionally, six major hotel deals were finalized in the first half of 2024, and JLL facilitated two transactions worth a combined US$ 70 million early in the second half of the year. The focus on upscale and mid-scale hotels reflects growing domestic demand and the potential for higher returns in these segments.

Key Market Segments and City-Specific Growth:

The report also highlights the significant number of keys signed in 2024—a total of 19,442 keys during the first half of the year, with 83% of these located in Tier-II and Tier-III cities. This growth is primarily driven by management contracts, which accounted for 89% of the signings. Meanwhile, franchises made up 8%, and lease and revenue share agreements contributed 3%.

Tier-I cities such as Mumbai, Hyderabad, Pune, and Chennai witnessed considerable activity, each signing over 250 keys. These markets are supported by strong domestic demand and expanding commercial activities. Additionally, over 6,071 keys were added through new hotel openings, with the mid-scale segment capturing a 46% market share.

Greenfield Projects and Tier-II/Tier-III Market Activity:

Another major development is the rise of greenfield projects, which added approximately 13,700 keys, surpassing the total keys added in 2023 (13,600 keys). This trend shows increasing investor confidence in developing new hotels across emerging markets. While Tier-I markets account for 78% of projected transaction volumes, Tier-II and Tier-III markets make up the remaining 22%, highlighting the growing importance of these smaller cities in India's hospitality industry.

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The report also notes that air connectivity improvements and expanding commercial markets have contributed to the sector's upward trajectory. Mr. Jaideep Dang, Managing Director of JLL’s Hotels and Hospitality Group, India, pointed out that investor interest has surged due to these favorable macroeconomic factors.

Upscale Hotels and Market Forecast:

The upscale hotel segment's dominance in transaction volume is a notable trend. Investors are particularly drawn to this segment because of its ability to attract both business and leisure travelers. With rising disposable incomes and increased travel frequency, upscale hotels are seen as a lucrative investment option. Furthermore, the mid-scale and luxury segments are also performing well, with rising demand in both domestic and international markets.

As the year progresses, the hospitality sector in India is poised to continue benefiting from the trends observed in the first half of 2024. The JLL report anticipates a continued increase in hotel transactions, particularly in Tier-I cities, where the demand for hotel rooms is expected to remain strong due to expanding commercial hubs and an increasing influx of corporate travelers.

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