India Mid-Scale Hotels Market Outlook to 2029

India Mid-Scale Hotels Market Overview

• The India Mid-Scale Hotels Market has experienced significant growth, reaching a market size of INR 315 Bn driven by the expansion of domestic tourism and the rising disposable incomes of the middle class. This growth is further supported by the increasing demand for quality yet affordable accommodations among both business and leisure travelers. The proliferation of branded mid-scale hotels across the country has also contributed to this upward trend.

• Major urban centers such as Mumbai, Delhi, Bengaluru, Hyderabad, and Chennai dominate the mid-scale hotel market in India. These cities serve as key business and tourism hubs, attracting a substantial number of travelers seeking mid-range accommodations. The concentration of corporate offices, industrial activities, and cultural attractions in these areas drives the demand for mid-scale hotels, making them pivotal markets within the industry.
• The Swadesh Darshan scheme by the Ministry of Tourism aims to develop a comprehensive framework for the holistic development of tourist destinations. With an outlay of INR 1,750 Cr for FY 2024-25 in the Union Budget 2024-25, the scheme is designed to promote responsible and sustainable tourism practices nationwide through collaborative efforts with the state governments, Union Territory authorities, and local governments.

India Mid-Scale Hotels Market Segmentation

• By Ownership Type: The market is segmented by ownership type into chained or branded hotels and independently owned hotels. Independent hotels continue to dominate the market in terms of the number of properties. Independent hotels dominate in certain regions due to their flexibility in catering to local cultural preferences, personalized guest experiences, and unique offerings. They often appeal to travelers seeking authenticity and affordability, especially in less urbanized or niche tourism destinations.

• By Traveler Type: The market is also segmented by traveler type into business travelers and leisure travelers. Leisure travelers dominate the mid-scale hotel market as they drive demand for affordable accommodations during vacations, holidays, and family trips. India's diverse tourist attractions, including cultural, historical, and natural destinations, attract significant leisure travel, bolstering mid-scale hotel occupancy rates.

India Mid-Scale Hotels Market Competitive Landscape

The Indian mid-scale hotel market is characterized by the presence of several key players, each contributing to the industry's growth through strategic initiatives and service offerings.

India Mid-Scale Hotels Market Analysis

Growth Drivers

• Increasing Disposable Income and Rising Affluence: The expanding Indian middle class, with higher spending power, is fueling domestic tourism and boosting the demand for hotel accommodations. In early 2024 alone, Indian airports handled 97 million passengers, a milestone that previously took years to achieve. As travel becomes a priority for Indian households, mid-scale hotels have responded by integrating technology and offering personalized services to meet evolving guest preferences.
• Urbanization and Infrastructure Advancements: Rapid urbanization and significant infrastructure developments are driving the mid-scale hotel market, especially in tier-2 and tier-3 cities. Enhanced connectivity through improved roadways, rail networks, and air travel has made these regions more accessible, attracting both travelers and hotel developers. These cities are emerging as key markets due to their improved infrastructure, facilitating both business and leisure travel.
• Growth in Bleisure (Business + Leisure) Travel: The rise in business travel, driven by India's economic growth and the expansion of startups and SMEs, has significantly increased the demand for mid-scale hotels, particularly in business hubs like Bengalurus Whitefield, Punes Hinjewadi, Gurugram, and Hyderabads Cyberabad. Additionally, the growing popularity of corporate events and MICE (Meetings, Incentives, Conferences, and Exhibitions) in smaller cities is further driving demand for budget-friendly mid-scale accommodations that cater to business travelers seeking quality and affordability.

Challenges

• Rising Competition in a Fragmented Market: The mid-scale is becoming increasingly competitive within a highly fragmented market. Cities are home to a diverse mix of branded and unbranded hotels, ranging from family-run establishments to larger hotel chains. While branded hotels traditionally focused on luxury and premium segments, fueled by foreign tourism, the surge in domestic travel has encouraged many brands to expand into the mid-scale segment, further intensifying competition.
• Skilled Labor Shortage: Branded hotels in India are grappling with a significant shortage of skilled labor, with a current deficit estimated between 80,000 and 100,000 workers. These hotels require approximately 1.2 to 1.5 million personnel annually, and this demand is growing at a steady rate of 5.5-5.6%. This labor shortfall impacts service quality, reduces operational efficiency, and creates challenges for meeting the increasing demands of the rapidly growing mid-scale hotel segment.

India Mid-Scale Hotels Market Future Outlook

Over the next five years, the India mid-scale hotels market is expected to exhibit substantial growth, reaching a market size of INR 530 Bn in 2029, propelled by the continuous rise in domestic tourism, increasing urbanization, and the expanding middle-class population. The government's initiatives to promote tourism and improve infrastructure are anticipated to further enhance market dynamics. Additionally, the adoption of technology and emphasis on sustainable practices are likely to shape the future landscape of the mid-scale hotel industry in India.

Future Market Opportunities

• Strategic Partnerships and Alliances: Collaborations between mid-scale hotels and various stakeholders are pivotal for market expansion and service enhancement. Aligning with established hotel brands or forming alliances with hospitality consultants can significantly boost market reach and operational efficiency. Partnerships facilitate access to broader distribution channels and shared resources, leading to improved service offerings. Such alliances are instrumental in navigating the competitive landscape of India's hospitality industry, providing mid-scale hotels with the necessary support to thrive.
• Development of Niche Markets: India's diverse tourism landscape offers mid-scale hotels the opportunity to cater to specific market segments, such as eco-tourism, wellness retreats, and cultural tourism. By focusing on niche markets, hotels can attract travelers seeking unique experiences, thereby differentiating themselves in a crowded market. This approach not only meets the growing demand for specialized travel experiences but also allows hotels to command premium pricing and foster customer loyalty. Developing niche markets is a strategic move to capitalize on emerging travel trends and consumer preferences.