What will 2025 look like for the Indian hospitality industry? Will it continue on the trajectory set by 2023 and 2024, or are there disruptions on the horizon? Most analysts predict the current growth story to persist, and peers in the hotel industry remain publicly optimistic.

However, while a rising tide lifts all boats, it is essential to examine what is driving this tide. Is it the natural ebb and flow, where an inevitable downturn follows a surge? Or are these rising waters signaling deeper disruptions—perhaps even a tsunami? While no dramatic shocks are expected in the coming year, it is important to look beneath the surface, as certain undercurrents may pose challenges in 2025.

The Numbers Don’t Tell the Whole Story

Room rates continue to rise across almost every market, but in dollar terms, they have remained largely flat due to the depreciation of the Indian Rupee. This presents a double-edged sword. The current market buoyancy is driven by a growing domesticaudience, supposedly unaffected by currency fluctuations—though that is not entirely true. The leisure segment, in particular, faces increasing competition from Southeast Asian destinations, where, despite currency appreciation, overall value remains more attractive and affordable than many domestic alternatives. As a result, we can expect intensified competition, which could slow the upward trajectory of room rates.

On the flip side, the industry still relies heavily on imported products, particularly in the premium segment, making operations more expensive as the Rupee weakens. Maintaining current GOP (Gross Operating Profit) margins will become an increasingly strenuous challenge.

The Foreign Arrival Gap

Despite global travel rebounding, foreign arrivals to India have yet to reach pre- pandemic levels, particularly in the leisure segment. Compared to our peers, India remains significantly behind in attracting high-spending tourists. A glance at major resort airports—Goa being a prime example—confirms this gap. With the appreciation of their home currencies against the Rupee, India should be a more compelling choice for international travelers, yet this has not materialized.

This leads to a deeper concern: has the underlying value proposition kept pace with rising prices?

Sustainable Growth or Short-Term Euphoria?

Steady growth and strong EBITDA figures are always welcomed. However, if price increases are not backed by corresponding value additions, the current optimism could swiftly turn into a long-term setback. Simply raising prices without enhancing offerings amounts to price-gouging, which is unsustainable.

While price is fundamentally dictated by supply and demand—both relatively inelastic in the short term—hoteliers must be strategic. They need to anticipate inevitable shifts in supply and adjust accordingly.

The Expansion Challenge

If the ambitious growth projections of major hotel brands hold true, the number of available rooms in India could double in the coming years. Even accounting for discrepancies between projected and actual execution, this expansion will be significant.

The resulting pressure on topline revenue may not be immediate in 2025, but it will become evident in the years ahead.

Talent Shortages and Operational Pressures

A growing concern across the industry is the deepening talent crunch, which will have serious implications for both operational efficiency and financial performance. The shortage is already acute, though temporarily masked by intercompany poaching—a game of musical chairs where one resignation sets off a chain reaction of departures across the industry.

However, as new properties come online, poaching alone will no longer suffice. Retention will require a more structured, intentional approach. Owners and operators will have to rethink compensation models, accept that higher salaries may be necessary for fewer employees, and drive efficiencies to maintain cost structures. Those who fail to innovate in this area will face mounting challenges, both financially and operationally.

2025 holds immense promise for the Indian hospitality industry, but one cannot overlook the shifting undercurrents beneath the surface.