India's Hotel Dream: Why Tech And Demand Are Driving The Story
Sanjay Ghare, Founder & CEO, Vervotech (A Constellation Inc. company), Investor in Travel startups.
From my experience, having observed the global travel industry for decades, I can say that India's hospitality sector is not just experiencing growth—it is demonstrating an upward trajectory whose base was prepared by many stakeholders. This story has many heroes; I'll discuss each in greater detail.
Before I move to that, the reality of the day is that India's accommodation industry is expected to reach an INR 1 trillion valuation ($11.7 billion) by the end of this financial year, with projections extending to INR 1.1 trillion ($13 billion) by 2026-27, supported by a CAGR of 10.5%.
This trajectory is not accidental. It is a cumulative outcome of growing domestic demand, conscious effort from the government and an obvious tech ecosystem in the country that has fundamentally changed the dynamics of the industry.
The Demand Story: A Multichannel Push
What often remains under the radar in most external analyses is the significant impact of the "New Indian Traveler." Domestic tourism is no longer merely a contributor; it has become the primary contributor, accounting for a substantial 50% of incremental revenue in the hospitality sector. This internal demand base provides a strong resilience, protecting the industry from the volatility of global economic or geopolitical upheavals (wars, sanctions, pandemics, etc.). While international tourist arrivals have also shown a strong recovery, reaching 9.24 million in 2023 (per the latest government data available), the sheer scale of domestic engagement has been the key highlight.
Also, the industry's thoughtful diversification into other high-value segments—meetings, incentives, conferences, and exhibitions (MICE), spiritual tourism, and medical travel—has also played a critical role. The MICE sector alone is projected to more than double from $49.4 billion in 2024 to $103.7 billion by 2030.
Additionally, India's Medical Value Travel sector, valued at $7.69 billion in 2024, is also attracting millions of foreign patients, with projections indicating a market size of $16.21 billion by 2030.
This multi-segment approach ensures the market remains attractive for investments and revenue channels remain fairly stable.
'Ease Of Doing Business' Dividend: The Sovereign Push
As I mentioned earlier, the government has consciously tried to create favorable policies. From an investor's perspective, the Indian government's role is no longer just limited to regulation; the industry now sees it as a proactive strategic partner. Over the years, they have cultivated an environment conducive to investment and growth.
The policy permitting 100% foreign direct investment (FDI) under the automatic route in the hotel and tourism sector is a clear signal of intent to create a conducive environment for businesses in the industry. The move eases the investment process by removing the requirement for prior government approval, given investments adhere to established regulatory norms. It has been instrumental in attracting capital for infrastructure development and improving service standards to meet global expectations.
The Digital Backdrop: The Role Of B2B Solutions And OTAs
One part of this growth story that cannot be undermined is the country's sophisticated digital ecosystem that supports the operational efficiency and expansive market reach of India's hotel industry. B2B solutions—including global distribution systems (GDSs), bedbanks, central reservation systems (CRSs), channel managers and mapping solutions—all have played a significant role. These technology players support travel agents, aggregators and tour operators with the centralization of travel content distribution, management of real-time pricing, and automation of complex domestic and cross-border transactions. This digital infrastructure is critical for hotels to manage complex distribution networks and revenue streams.
Online travel agencies (OTAs), while often seen through the lens of commission structures, play an undeniable and extremely crucial role in distribution. Without them, this demand can't be realized. Platforms like MakeMyTrip, EaseMyTrip, Cleartrip and Yatra dominate the Indian OTA market. They function as primary "discovery engines" within the travel ecosystem. Obviously, their substantial marketing budgets, which are usually much larger than those of individual hotels, ensure exceptional visibility for hotels on major search engines.
The Next Phase: AI, LLMs And Depth
The current growth trajectory is definitely impressive, but in my opinion, it is merely a warmup to the next phase, which will be bigger and better and will be defined by intelligent automation and a prominent shift toward conscious travel. While the adoption of advanced AI in the Indian hotel industry remains limited to foundational systems, its transformative potential is yet to emerge.
Over the next five years, as I see it today, the industry is poised for a significant deepening of technological integration, with large language models (LLMs) at the center of everything. You can foresee LLM-powered concierge services that predict guest needs, customizing everything from room temperature to dining recommendations based on deeper analysis of past preferences and their real-time behavior. Generative AI will facilitate dynamic content creation at scale for marketing and guest communication, enabling highly customized, personalized guest interactions. All of it together will lay the foundation for the next generation of growth, which will be massive.
Conclusion
India's hotel industry's growth story thus far is more than a numerical milestone; it is rooted in execution and a well-thought-out strategy to generate sustainable demand. The INR 1 trillion valuation is a telling testament to the effort that has gone into generating robust domestic demand, a strategically enabling and supporting government, and a rapidly evolving technological ecosystem in the country, along with the technology entrepreneurs who have dared to see the big picture.
As AI, particularly LLMs, becomes more deeply embedded in the ecosystem, the industry will be open to the next levels of personalization, operational efficiency and sustainability. India is not just a market; it is a compelling case study of how strategic foresight, policy alignment and technological adoption can come together to create magic in terms of demand and growth in any industry.
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