Is it an office or a hotel? Investors repurpose spaces as sellers hold out

Good assets are few and far between, according to Sanjay Sethi, managing director and chief executive officer at listed hotel ownership company Chalet Hotels Ltd. “On the M&A side, we focus on such assets with development or upside potential of expanding rooms or repositioning them to make them better.”

Chalet will look to build more rooms in some of its upcoming acquired hotels. Indian Hotels Company Ltd’s Taj, which is building its Bandstand Hotels (erstwhile Sea Rock Hotel), will have a section of about 85 apartments to monetize the property immediately.

Samhi Hotels Ltd plans to convert an existing office building into a hotel in Hyderabad. ITC Hotels Ltd also has an apartment complex at its Colombo, Sri Lanka property.

Dusit International signed a property in Bagepalli, Karnataka–under its ‘Dusit Princess’ brand–with villas, a hotel for senior living, a clubhouse and some retail stores over 80 acres. It will build hotels and villas in Raipur, too, while its Bhiwadi, Rajasthan property will offer hotel and clubhouse facilities.

Hotel deals momentum is expected to persist this year. Real estate consultant JLL projects a total transaction value of $330 million (about ₹2800 crore) in 2025, similar to last year’s. “This estimate could be conservative as the potential sale of newer hotel land parcels can further boost the overall figure,” said Jaideep Dang, managing director, hotels & hospitality group at the firm.

The past few months saw some large transactions. JLL facilitated the sale of Holiday Inn in Mumbai in September 2024 at a valuation of ₹450 crore ($55 million). In October, Bengaluru also saw two hotel acquisitions in a day as SAMHI and Juniper secured deals worth ₹485 crore. SAMHI sold a Chennai hotel it owned to GreenPark Hotels and Resorts for ₹53.5 crore in February this year. Chalet purchased The Westin Himalayas in Rishikesh for ₹530 crore.

Hotel transactions in India remain largely fragmented, making it difficult to quantify annual deal activity but 2024 witnessed a surge in transactions, resulting in some landmark deals, according to Megha Tuli, partner and co-founder at hospitality consultant Hotelivate.

“Transaction volumes in 2025 are expected to reflect a similar trend, with buyer interest continuing to outpace available supply,” she said. “But the imbalance is likely to stabilise over the next couple of years as the sector evolves and pricing expectations align more closely with market realities.”

Valuation mismatch

Investor interest in acquiring properties is surging even as listed hotel companies reach record-high valuations.

“Hotel companies continue to prioritise acquiring assets in tier 1 cities or established, branded hotels in other promising locations,” said Tuli. “However, while assets are available, their valuations are exceeding what many buyers consider justifiable.”

Assets up for grabs are scarce too. India has about 150-odd hotels with large room inventories of about 300 or more. Most of them are owned by bigger companies like ITC, Taj, Oberoi, Chalet, Hyatt and others, which are not in the market to sell their assets.

“It would be impossible to buy such hotels since they’d be too expensive and won’t give a 10-12% return to the buyers. So we’re focused on assets which we can make changes to and solve for our own yield,” said Ashish Jakhanwala, chairman, managing director and chief executive of Samhi Hotels.

The Gurugram-based company is in the process of converting the Hydrerabad office building into a 175-room hotel, a first of its kind in a business park, Hytech City. “This shows we don’t always need to rely on converting existing hotels into newer ones. It also creates incremental growth opportunities for us,” Jakhanwala said, adding that the company is exploring or three more such projects.

According to Sethi of Chalet, recent deals are valued at earnings before interest, tax, depreciation and amortization (Ebitda) multiple or what the asset would yield since there is room to grow or add rooms or create additional capacity. Some assets the company has bought in the recent past have had a 10-11 times Ebitda potential, he added. The multiple measures a company’s valuation based on its operating income.

JLL’s Dang said this reflects hotels’ focus on mitigating risks around and efficiently work towards achieving better yields.

Jehangir Aibara, director at hospitality consultant Mahajan & Aibara, also expects the deal activity to be similar to last year’s. But he added that while some small to mid-sized hotel ownership companies are selling individual assets to fund other future investments, there is a mismatch with owners seeking higher-than-usual prices.

“Once these price expectations adjust in the short to mid term, the pace of transactions should pick up.”

New projects

Still, many hotel businesses are considering developing their own assets. Last week, Juniper Hotels, which owns several Hyatt Hotels properties in India, signed an agreement with Assam Tourism Development Corporation to develop a five-star resort hotel in Kaziranga under a public-private partnership. The company, in its recent earnings call, said it will allocate ₹100 crore of capex over the next two to three years to develop the property.

The Leela Palaces, Hotels and Resorts is developing its own assets, Anuraag Bhatnagar, chief executive officer at the company, said at a recent event in New Delhi. “There is an opportunity for a land asset in Agra which the company owns.”

The company recently signed a long-term concession agreement to build a property in Srinagar. In the past, it announced new properties in Ayodhya, Sikkim, Bandhavgarh and Ranthambore, which would take its hotels to 20 in the next four to five years.

House of Abhinandan Lodha has also earmarked ₹2,000 crore to build luxury hotels.