Learnings from 2024: Shaping the Future of India's Mid-Tier Hospitality in 2025

Authored Article by – Aditya Sanghi, Co-Founder & CEO, Hotelogix

India's hospitality industry witnessed a remarkable growth in 2024, especially in the mid-tier segment. Hotels in this segment are effectively

bridging the gap between luxury and budget hotels and are continuing to evolve in response to market demands, technological advancements, and consumer preferences. Here are some key learnings from 2024 that can support mid-segment hotel brands to thrive in 2025.

The rise of domestic travelers

In 2024, domestic travel did well, driven by improved communication infrastructure, rising disposable incomes, and a renewed focus on exploring local destinations. About 80% of domestic travelers visit unexplored tier 2, 3, and 4 cities, diverse landscapes, vibrant cultures, and rich heritage. Key factors like better connectivity through new airports and highways and government initiatives promoting offbeat destinations have played a significant role. Domestic travelers are expected to travel more in 2025, comprising over 90% of total travelers.

Key takeaways for 2025

● They need to align their offerings and services with local flavors and customs. Yes, we are talking about differential experience based on guest requirements. This is a fantastic way to elevate the guest experience and ensure their satisfaction exceeds expectations.

● Collaborations with local artisans and businesses will create authentic guest experiences and strengthen community ties.

● Domestic travelers are looking for great hospitality experiences without spending too much. They are value-conscious, and mid-segment hotels need to pay attention to this aspect.

The emergence of tier 2, 3, and 4 cities

Mid-segment hotels in India are expanding rapidly in tier 2, 3, and 4 cities. With burgeoning regional tourism and socio-cultural events, these regions present a promising opportunity. Moreover, establishing properties in these regions is a financially viable option for domestic mid-segment brands, as they can bypass the significant land and associated development costs that come with tier 1 cities.

Key takeaways for 2025

● Mid-segment hotels need to be strategic and forward-thinking in their approach. Whether constructing their own property or leasing, the focus should be on tier 2, 3, and 4 localities that hold importance in leisure and business travel. This strategic approach will ensure that hotels are well-positioned to cater to the evolving market needs.

● While signing management contracts, they must draw up flexible agreements focusing on competitive cost structure/revenue share and exit terms with local suppliers. It will fuel their growth for sure.

The power of home-grown hospitality technology

In 2024, technology helped many leading home-grown mid-segment hotel brands achieve their digitization goals. Almost all newly established hotel groups in the mid-market segment in 2022-2023 adopted cloud solutions. At the same time, about 60%-70% of old hotel groups in this segment have already started their cloud migration process. The best part is that India-made cloud-based hospitality solutions are at the forefront, rapidly driving the industry's shift. Domestically developed and globally trusted cloud-based solutions have helped hotels in the mid-market segment adopt world-class and modern tools to compete efficiently with international rivals to automate operations, sell more online, and serve guests better.

Key takeaways for 2025

● Mid-segment hotels must increase technology investments to remain competitive and future-ready as international brands are also entering the budget segment.

● They have to invest in the right solution. For example, groups in this segment need to adopt a cloud-based Hotel PMS with multi-property management features.

● Additionally, they must adopt other solutions, including a channel manager, booking engine, revenue management system, etc., to sell more online while optimizing their room rates for enhanced revenue.

● They must also pay attention to technologies like self-check-in kiosks, mobile key access, and other contactless services.

The shortage of skilled workforce

The Indian hospitality industry is experiencing a significant staff shortage - about a 20%-25% dearth in skilled workforce. The demand for more workers is anticipated to rise in the coming years as the industry is expected to expand with the addition of new hotels. Additionally, it is worse for mid-segment hotels because most of the available workforce is inclined to work with international hotels due to relatively higher remuneration and perceived brand value.

Key takeaways for 2025

● They must invest in training and development programs to attract and retain talent. They must provide upskilling opportunities and career progression paths within the organization.

● Fostering a positive work environment by offering competitive pay packages, regularly recognizing their contribution, promoting work-life balance, and establishing open communication can also help address the issue.

● The most important takeaway for 2025 would be investing in technology. It will automate most hotel operations across departments, reduce errors, and save time while eliminating staff dependency.

India's mid-tier hospitality is not just about filling the gap between luxury and budget; it is about redefining the essence of hospitality itself—offering value, comfort, and authentic experiences that resonate with the heart of every traveler. The segment's resilience, adaptability, and focus on delivering memorable experiences will define its success in the coming year.