Why midscale is the sweet spot in India’s hotel market

rooms, is projected to reach 350,400 rooms by 2030. The composition of that pipeline, though, is telling.Midscale hotels account for 37% of the existing branded hotel room supply but 39% of the upcoming pipeline, suggesting that a large proportion of future supply is tilting further toward the segment.The economy segment, by contrast, is shrinking from 6% of current inventory to just 3% of pipeline share.

Interestingly, luxury and upper-upscale each account for roughly 17% to 18% of both existing stock and upcoming supply.Midscale properties—positioned between economy and upscale—offer comfortable rooms and basic amenities at moderate rates.The format aligns with India’s demand profile, which remains overwhelmingly domestic: business travel, regional corporate activity, leisure trips, pilgrimages, weddings and meetings.“India’s expanding middle-income base is widening the branded hotel opportunity beyond traditional premium travellers,” said Akash Datta, managing director (South Asia) at HVS Anarock. “As travel becomes more frequent and aspirational, growth is shifting from luxury and upper-upscale toward midscale, a segment that enables more efficient capital deployment while addressing broad domestic demand."Yet growth alone does not ensure returns.

"Our report reinforces that capital deployment remains the single largest risk variable in hotel development. This is particularly true in midscale hotels, where pricing elasticity is limited, and margins are tight.”Between 2017 and 2025, hotels raised average room rates by about 5% annually and improved revenue per available room at a similar pace, suggesting that pricing power has returned and demand has been strong enough to support steady rate increases despite the