The Indian hospitality sector is currently navigating a distinct dichotomy. On the surface, the industry is enjoying a vibrant resurgence, with occupancy rates and average daily rates (ADRs) climbing steadily amid a post-pandemic travel boom. However, beneath this operational success lies a persistent structural challenge: the crushing cost of capital. Building and acquiring hotel assets in India remains a capital-intensive endeavor with long gestation periods, often putting severe pressure on Returns on Investment (ROI) despite healthy topline revenues.
As Union Budget 2026 approaches, industry leaders are looking beyond temporary demand drivers and focusing on long-term financial sustainability. The primary demand on the wishlist is the grant of ‘Infrastructure Status.’ This classification is viewed as a critical financial lever that would allow hoteliers to access long-term institutional credit at lower, repo-linked interest rates, effectively reducing the debt burden that often stifles expansion. Beyond the balance sheet, the sector is also grappling with a talent crunch and connectivity bottlenecks. Stakeholders are urging the government to align tourism growth with aggressive aviation expansion and state-backed skilling initiatives to ensure the workforce can keep pace with the industry’s trajectory.
Vinesh Gupta, General Manager, The Den Hotel Bengaluru, highlights this need to bridge the gap between operational performance and investment viability. “While the hospitality sector is witnessing robust operating performance driven by strong travel demand, returns on investment remain under pressure due to the industry’s capital-intensive nature and prohibitive acquisition costs.
Introducing tax incentives on capital expenditure and granting the long-awaited infrastructure status would provide a significant boost. This would unlock access to long-term institutional credit at competitive repo-linked or international benchmark rates, thereby easing the cost of capital and fuelling sustainable growth.
Furthermore, to bridge the widening skills gap, we look forward to enhanced policy support for government-led manpower development and training initiatives. Simultaneously, strengthening aviation connectivity and expanding the domestic airline network remain vital to unlocking new travel corridors and reinforcing India’s position as a premier global tourism destination.”
