When a hotel room costs more than a small car, hospitality inflation becomes an infrastructure warning.
I am not among those who believe luxury should apologise for being expensive. A fivestar hotel is not an essential commodity, nor should the government decide what the presidential suite at a premium hotel must cost. Hotels have shareholders, wage bills, and land costs, and the same right as airlines to price according to demand. Rising room rates are, in one sense, a sign of India’s economic success: Indians are travelling more, global businesses are coming here, weddings have become destination economies, and our cities are hosting events of genuine international consequence. I say this not as a distant observer of the hospitality industry. Having resided in five-star properties for 365 days a year, I have a sound understanding of how hotels and the hospitality industry function and operate. I have seen at close quarters the economics they contend with, the standards they are expected to maintain, and the delicate balance between occupancy, pricing, and service.
Yet there is a difference between a healthy premium and a scarcity premium. India is beginning to encounter the latter with uncomfortable frequency.
The price of scarcityÂ
ICRA expects premium hotel occupancy in India to remain at 72–74% in FY2027, with average room rates rising to Rs 8,600–8,800. More tellingly, it estimates that premium-room supply across 12 key cities will grow only 5-6% annually between FY2025 and FY2028, while demand grows 8-10%. That gap may sound modest on paper. But in a city hosting a major conference, concert, wedding weekend, or cricket match, it can become explosive. We have already seen the consequences. During the India AI Impact Summit in Delhi in February 2026, the influx of delegates pushed luxury-hotel prices sharply upwards. Media reports recorded standard rooms at leading luxury hotels being quoted at several lakh rupees a night, with many top properties effectively sold out. In Ahmedabad, hotel prices around the 2026 ICC Men’s T20 World Cup final rose by 300 to 400 per cent, with even budget rooms pegged at Rs 50,000. This is the business model of scarcity meeting India’s new ‘experience economy’. International concerts, global summits, sporting events, and destination weddings create the compressed demand that hotels love and cities should welcome. Coldplay’s Ahmedabad shows alone were estimated to have generated over Rs 640 crore in economic impact.Â
But there is a civic question hidden inside the celebration: if a successful event makes a city inaccessible to everyone who is not attending it, are we actually ready to host at scale?
An events economy without enough roomsÂ
India remains structurally under-supplied in branded accommodation. HVS Anarock has estimated that the country has only around 138 branded hotel rooms per million people, compared with more than 1,500 in China. Hotel development is accelerating — JLL says 51,647 branded rooms across 424 hotels were signed in 2025 — but 71% of those signings were in Tier-II and Tier-III cities. That is excellent news for travel beyond the metros, but it does not immediately solve room compression in Delhi, Mumbai, Bengaluru, Kolkata, or other major event cities. The luxury end is tighter still. The CEO of a luxury chain hotel told Reuters this year that India has only around 30,000 luxury rooms. For a country of our population, and an economy aspiring to host more global summits and international conventions, that is a remarkably thin cushion.
The state cannot be only the host
The easiest response would be to demand price caps. It would also be the wrong response. Administrative price control would distort the market, discourage investment, and simply move scarcity into less transparent forms — privileged allocations, opaque packages, and preferential access. If a government or public institution bids for, sponsors, or facilitates a mega event, accommodation should be treated as core urban infrastructure alongside the venue, airport, security plan, and transport network. A city should know, before it wins the event, how many rooms exist within 30, 60, and 90 minutes of the venue, what proportion can realistically be blocked, what other major events overlap with those dates, and when unused inventory will be released back to the market. For public-sector travel, there is scope for smarter coordination. Central and state government guest houses, tourism corporation properties, PSU guest houses, and training centres represent a dispersed pool of accommodation rarely considered part of a citywide event strategy. Not all will meet the requirements of an international delegation. But suitable capacity can absorb government and PSU travellers, technical teams, and lower-priority delegations, freeing commercial rooms for visitors without an institutional alternative. The longer-term issue is supply. Recent reporting on a NITI Aayog study noted that a hotel in India can take 36-48 months to move from approvals to commissioning, compared with roughly 12-18 months in competing ASEAN markets. Faster approvals, predictable land-use rules, and sensible infrastructure treatment for hotel projects would do more for affordability than outrage at a Rs 2 lakh tariff.
What hotels owe the cityÂ
Hotels, too, should resist treating every demand spike as a licence to test the outer limits of what the market will bear. Dynamic pricing is legitimate. Reputational capital matters, too. Last week, I had made a booking at a five-star hotel in Kolkata five months in advance, where we have corporate rates. Even with the corporate rate, a basiccategory room was offered at Rs 1.5 lakh per night, as a conference is scheduled in the city. It is precisely this kind of event-driven surge that raises the question of where dynamic pricing ends and scarcity pricing begins. For designated mega events, hotel associations and convention bureaux could create transparent citywide room pools, with negotiated allocations at pre-agreed event rates and clear release dates. Hotels should honour confirmed bookings, disclose cancellation conditions unambiguously, and work with organisers to draw peripheral hotels into the accommodation network through reliable shuttle systems. A room 20 kilometres away is not genuinely part of the solution if reaching the venue takes two unpredictable hours.
Tax policy deserves attention but should not become a distraction. Hotel rooms priced above Rs 7,500 currently attract 18% GST, and FICCI and EY have argued for reducing the tax burden on higher-priced accommodation. That debate is legitimate, especially if India wants its tourism sector to compete globally. But no tax cut can manufacture a room on a sold-out night. The deeper issue remains supply and planning. India should want full hotels. We should want visiting CEOs, artists, athletes, tourists, investors and delegates competing to come here. Empty hotel rooms are not a badge of affordability; they are often a symptom of weak demand. But there is a point at which ‘sold out’ stops being a triumph and becomes a constraint on the city itself. A global city is not one that can host one spectacular event at any price. It is one that can host the event, house the world, accommodate ordinary business, and continue functioning for its citizens at the same time.
That is also why the debate cannot end with supply alone. There may be a case for the government to examine whether some form of exceptional oversight is warranted when room rates rise to extraordinary levels during major events. I would be cautious about blunt price controls, but equally, we cannot ignore the fact that these inflated tariffs are often paid not only by private travellers and companies, but by government departments and public-sector enterprises as well. In the latter case, the cost is ultimately borne by taxpayers; in the former, by shareholders and consumers. At the very least, major event periods demand greater transparency, coordination, and a mechanism to prevent scarcity from becoming profiteering.
Ultimately, we are now in a position where India’s ambitions are already world-class. Our hospitality capacity, our planning — and perhaps our safeguards against excess — must now catch up.
* Sundeep Bhutoria is a culturist, social activist, wildlife enthusiast. He writes for The Sunday Guardian.Â
