Greenfield hotel investments have rebounded to pre-pandemic levels in the first half of 2024, with hotel chains aggressively expanding into Tier-2, 3, and 4 cities, according to data from HVS Anarock.
“After the pandemic, brownfield developments became the preferred choice due to lower risk and faster completion timelines amidst economic uncertainty. However, the focus is now shifting back to greenfield projects,” said Mandeep S. Lamba, President and CEO of HVS Anarock.
This renewed interest in greenfield developments is driven by the rapid growth of both business and leisure travel in smaller cities. In 2023, greenfield projects accounted for 48% of hotel brand signings, increasing to 53% in the first half of 2024, signaling a return to the levels seen before the pandemic in 2019, as per HVS Anarock data shared with *Business Standard*.
Greenfield hotel developments involve constructing new hotels on undeveloped land, while brownfield projects focus on expanding or redeveloping existing properties. During the first half of 2024, JLL reported six major hotel deals, including operational assets in Tier-I and leisure markets, and land leases in airport districts for greenfield development.
“Indore, Kanpur, Bhubaneswar, Varanasi, Udaipur, Mangalore, and Coimbatore are witnessing increased demand as greenfield projects here can capture early-mover advantages and cater to a growing middle-class appetite for regional travel,” said Nandivardhan Jain, CEO of Noesis Capital Advisors. He noted that government initiatives promoting sustainable tourism and simplifying land acquisition through single-window clearances are encouraging greenfield investments.
Deepak Jain, Managing Director at MayFair Consultancy, added that the hospitality sector has seen a significant investment shift post-COVID, with banks becoming more willing to lend due to the profitability of hotel investments. Mayfair Consultancy has signed five management contracts and is nearing finalization on another six across various segments, from economy to upper-scale hotels.
Industry experts highlight the flexibility of greenfield developments, particularly in emerging destinations where existing hotel infrastructure is limited. These projects, however, can take 36 to 60 months to complete due to regulatory hurdles and infrastructure costs, with land acquisition often proving to be a major challenge.
“Macroeconomic factors like inflation, rising construction costs, fluctuating interest rates, and limited borrowing options for non-institutional investors further complicate greenfield projects,” Lamba explained.
The greenfield boom is benefiting not only leisure travel but also corporate travel, especially in upper-upscale segments in Tier-2 cities. Cities like Ludhiana, Chandigarh, Bhopal, Patna, and spiritual hubs such as Varanasi, Ayodhya, Puri, and Tirupati offer great potential for boutique-style greenfield projects, according to Nandivardhan. These locations present ideal opportunities for investors looking to tap into underserved markets and create high-margin hotel properties.
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