A widening demand–supply gap, shifting traveller behaviour and renewed investor confidence are setting the stage for a decisive growth phase in Indian hospitality — one that is expected to reshape rates, occupancy and long-term value creation.
By Lipla Negi
India’s hospitality industry is poised for a strong upward cycle, with demand increasingly outpacing supply, according to Dr Sanjay Sethi, Managing Director & CEO of Chalet Hotels Limited. In an exclusive conversation with HotelTalk, Sethi shared insights on rate growth, global benchmarking, investor sentiment and the policy reforms needed to sustain momentum.
Travel is no longer discretionary
Speaking on changing consumer behaviour, Sethi pointed to a decisive shift in how travel is perceived, particularly among younger travellers.
“Travel is no longer a discretionary spend. Around 85 per cent of millennial and Gen Z travellers say they will spend significantly more on travel and F&B than they did last year, which is a strong indicator of the trend we are moving towards. Travel is now a lifestyle.”
He added that rising incomes and a growing appetite for authentic experiences are reshaping demand across both leisure and urban markets.
A strong multi-year growth cycle ahead
On India’s post-pandemic hotel development cycle, Sethi described the current phase as one of the strongest in recent years.
“India is witnessing one of its strongest hotel development cycles in years. We have got a very good cycle ahead of us — I think the next four or five years look extremely strong. There will be pockets that may be oversupplied, but overall, the India story is very bullish.” According to him, the headroom for growth — across both rates and occupancy — remains significant. “The headroom for growth, both in rates and occupancy, is massive right now.”
India still priced below global peers
Addressing concerns around rising room rates, Sethi argued that India remains competitively priced when benchmarked against global cities.
“On the rate side, while everyone says we are becoming expensive, if you really look at it today, even a city like Mumbai, which is operating at around US$ 160–US$ 170, is still discounted by at least 30 per cent to 40 per cent.” He added that this comparison becomes more pronounced when viewed against the next tier of global cities.
“If you look at the next tier — Dubai, Singapore, Hong Kong, and Berlin — we are priced about 40 per cent lower than those cities. That is the gap we will eventually fill, and we see that as a key opportunity for rate growth.”
Investor confidence led by upscale and upper-upscale segments
Sethi highlighted a renewed wave of investor confidence, particularly in the luxury-adjacent segments. He says, “I believe that the upper-upscale and upscale slot that we have, which is just below luxury, is probably the most rewarding segment to invest in.”
He explained that Chalet Hotels’ strategy is firmly anchored in this space. “We are investors, and remember, we are not an asset-light company. We either buy land and build our hotels or buy ready hotels.”
“All our growth has been in the upscale and upper-upscale segment, and zero below upscale. We have one or two luxury hotels, but primarily, that slot offers stability of growth in income, revenue, and leadership.”
Sethi added that this approach also helps manage cost cycles more effectively. “It also keeps costs under control, both construction (capex) and operating costs, because you have the flexibility to manage the cycles as they go up and down.”
GST rationalisation remains critical
On the policy front, Sethi reiterated that while recent GST reductions were welcomed, structural challenges persist. “The GST reduction in the recent announcements was a welcome move. But the withdrawal of ITC has created a huge challenge for many hotel operators and restaurants.”
He also flagged the need to revisit the GST slab structure for higher room tariffs. “The 18 per cent GST slab for rates above ₹7,500 is still too high, and it needs to come down to 12 per cent.”
Sethi suggested that the ₹7,500 threshold itself requires rethinking. “The ₹7,500 threshold should be reset by about 4.5 per cent every year since it was introduced and then linked to the Consumer Price Index (CPI) as an annual adjustment.”
“That way, we would not have to keep going back to the authorities for a revised cutoff. It would automatically adjust with inflation.”
Making India competitive for global travellers
Looking ahead, Sethi stressed the importance of aligning India’s tourism product with global expectations.
“It is very important that the tourism product we have in our country evolves to the level of quality that global travellers are used to.”
On the broader outlook, he remained firmly optimistic. “A solid bull run lies ahead for the hospitality industry. We are already on a strong wicket, and I see this getting even stronger as we move forward.” He said.
