Hotels play the long game with leasing deals to stay fit

Several leading hotel companies are entering into long-term leasing deals to beat competition, marking a significant change in how they expand into high-demand markets.

While acquisitions and management contracts dominated the industry for years, the leasing model is gaining traction due to its inherent cost-effectiveness and flexibility.

Recently Royal Orchid entered into a long-term lease for a 300-room upscale property under the Iconiqa brand near Mumbai’s international airport. Similarly, Samhi Hotels, known for its asset-heavy strategy, has signed a lease for an empty office building in Hyderabad, which it plans to convert into a 170-room W hotel, managed by Marriott International.


Others like Lemon Tree, Ginger and Fern, too, are opting for 30-plus-year leases to scale their brands efficiently.

This shift allows operators to rapidly enter prime metro markets with lower upfront investment, while property owners benefit from consistent, reliable revenue streams backed by professional hotel management.

For hotel companies, leasing helps expand portfolios without the complexities of ownership, especially in high-demand cities where securing new land and developing properties can take years.

Meanwhile, “asset owners gain the benefit of stable returns with lower operational risk,” said Nandivardhan Jain, CEO , Noesis, a hotel investment and advisory firm, which has facilitated multiple leasing deals.

Hotel companies are looking at different ways to grow, and " leasing is a good way to grow as lesser capital is deployed upfront and we get a much higher share of revenue" said Ashish Jakhanwala, CMD , of the Gurugram based hospitality company , Samhi Hotels which follows a revenue shared lease model.

Also, hotel asset developers/owners want predictable returns. With a significant increase in cost of underlying real estate, increased time to market for greenfield hotels, and the fact that hotels are valued on cash-flow, leasing is being considered a better option as it is seen to have higher return on invested capital, said Arjun Baljee, president, Royal Orchid.

The company plans to open at least 10 leased hotels in 2025, adding to topline and bottomline growth, Baljee said. The company has struck one of India’s largest hotel leasing deals in Mumbai , with the hotel commencing operations this April.

In 2024, the hospitality sector witnessed significant momentum, with Bengaluru, Mumbai and NCR as the top markets for hotel transactions. Leisure destinations, pilgrimage hubs and industrial cities also saw substantial activity, collectively contributing to the sector’s acquisition tally of Rs 2,718 crore, a significant jump from the previous year, according to data collated by Noesis .

Metro cities remain the focus for hotel investments, driven by their economic activity, consistent corporate travel and high occupancy rates. However, buying operational assets in these cities has become increasingly challenging. With hotels achieving record profits, owners are holding out for premium valuations, said Jain of Noesis.

Tier 2 &3 markets too are becoming high potential markets,ideal for investors seeking diversified growth opportunities. With the market brimming with opportunities and strong investor sentiments, CY 2025 will be about tapping into untapped potential across markets, say experts.