How Experiential Travel Is Reshaping Property Demand

The hospitality industry is entering a period in which the location, physical quality and room count of a property are no longer sufficient to explain its commercial potential.

Travellers are increasingly choosing destinations and properties based on what they can do, learn, experience and access during a stay. This shift is changing the way hotels, resorts, villas and other hospitality assets are developed, positioned and valued.

For property owners and investors, this matters because demand is beginning to move beyond accommodation. The property itself is becoming part of the destination experience.

In India, the change is particularly visible. Hotel operators are expanding into leisure destinations, Tier II and Tier III markets, and experience-led formats. In 2025, hotel investment in India reached approximately US$567 million across 28 transactions, a 67% increase over 2024. Tier II and Tier III markets accounted for 40% of transaction volume, demonstrating that hospitality investment is no longer concentrated in the country's largest cities.

At the same time, industry performance remains strong. HVS ANAROCK reported nationwide hotel occupancy of approximately 63–65% in 2025, while average room rates reached approximately ₹8,500–₹8,700. The firm also noted that consumers are increasingly willing to pay for quality experiences.

The implication is straightforward: the next generation of hospitality properties will increasingly compete on the quality of the experience they enable, not simply the quality of the room they sell.

From Destination to Experience

Traditional hotel demand was largely structured around a simple proposition: provide a comfortable place to stay in a location where people already want to be.

That model still works. Location remains one of the strongest determinants of hospitality performance.

But the relationship between location and property is changing.

A traveller visiting a mountain destination may previously have selected a hotel based on price, views, room quality and proximity to attractions. Today, the decision may also involve access to guided hikes, local food, wellness programmes, cultural activities, outdoor experiences, craft workshops or simply a more distinctive way of interacting with the destination.

This creates a different competitive environment.

A property does not necessarily have to be in the most established destination to generate demand. It can create demand by offering something that cannot easily be replicated elsewhere.

This is particularly important for secondary and emerging destinations. A compelling hospitality concept can become an anchor for a destination rather than simply benefiting from existing tourism.

India provides a useful example. Hotel development is increasingly moving beyond metropolitan markets into destinations such as Goa, Rishikesh, Udaipur, Lonavala and other leisure markets. JLL reported that 71% of branded hotel signings in 2025 were concentrated in Tier II and Tier III cities.

The property and the destination are therefore becoming increasingly interconnected.

What Has Changed in Traveller Demand?

The shift towards experiential travel is not simply a generational trend. It reflects broader changes in how consumers allocate discretionary spending.

Travel has become one of the major categories through which people spend on experiences rather than physical goods. A 2026 CBRE analysis reported that Indian household spending on experiences is expected to grow faster than spending on physical goods between 2025 and 2030, with Gen Z emerging as an important driver of experiential travel demand.

This does not mean travellers have stopped caring about rooms.

It means the room is increasingly becoming one component of a larger purchase decision.

A guest may pay a premium for a property because of its food programme, access to nature, wellness offering, architecture, cultural relevance, privacy, activities or social environment.

For operators, this creates additional opportunities to increase revenue beyond accommodation.

For owners, it changes the question from:

“How many rooms can this property support?”

to:

“What commercial experiences can this property support?”

That is a much more useful question during acquisition and development.

Experience Can Expand the Addressable Market

One of the most important consequences of experiential travel is that it can expand the market for a property.

Consider a 20-room hotel located in a relatively remote destination.

Its conventional revenue model may depend almost entirely on room nights. The addressable market is therefore limited by the number of people willing to travel to the location and stay overnight.

Now consider the same property with a strong culinary programme, wellness offering, cultural workshops, destination events or guided outdoor experiences.

The property can potentially generate revenue from:

• Accommodation
• Food and beverage
• Day experiences
• Wellness
• Events
• Retreats
• Workshops
• Destination activities
• Private dining
• Corporate programmes
• Memberships
• Retail and products

Not every property should pursue all of these categories. In fact, trying to do so can dilute the proposition.

The strategic opportunity is to identify the experiences that naturally fit the location, property and target customer.

This is where hospitality development becomes more than a real estate exercise.

The New Economics of Hospitality Property

Experience-led hospitality also changes how properties should be evaluated.

Traditional hotel feasibility studies typically focus on metrics such as room count, occupancy, ADR, RevPAR, construction cost and operating margins.

These remain essential.

However, they do not capture the entire economic potential of an experience-led asset.

A property may have fewer rooms but generate stronger overall revenue because its F&B, events, wellness or experience components produce higher spend per guest.

This creates an important distinction between room economics and asset economics.

A 30-key resort with a strong destination restaurant, wellness programme and event calendar may outperform a larger 60-key property that depends almost entirely on accommodation revenue.

The number of keys alone therefore tells investors relatively little about the quality of the opportunity.

The more relevant question is how efficiently the entire asset converts its location, physical infrastructure and operating concept into revenue.

Experience Is Becoming an Asset-Selection Criteria

This has implications before a property is even acquired.

Historically, investors might evaluate a hospitality property based on:

1. Location
2. Land value
3. Existing infrastructure
4. Room inventory
5. Brand potential
6. Operating performance
7. Development potential

Experience-led hospitality adds another layer:

What experiences can this property uniquely support?

A property with direct access to a forest, river, coastline, agricultural land, historic district or culturally significant community may have substantially more potential than its existing built infrastructure suggests.

Conversely, a beautiful property may have limited commercial potential if it cannot support meaningful activities or if its surrounding environment offers little differentiation.

This is why hospitality real estate increasingly requires an understanding of both property fundamentals and consumer behaviour.

The Rise of the Destination Property

The strongest experience-led properties often function as destinations in their own right.

Guests do not simply choose them because they need somewhere to sleep. They choose the property because the property itself is part of the reason for travelling.

This model has existed for decades in luxury resorts, safari lodges and wellness retreats. What is changing is its expansion into smaller hotels, boutique properties, homestays, villas and independent hospitality businesses.

The opportunity is particularly significant for properties with distinctive physical characteristics.

A restored heritage home.

A plantation.

A coastal villa.

A forest lodge.

A working farm.

A mountain estate.

A former industrial building.

A historic mansion.

These assets may have limited value when evaluated purely as conventional real estate. Their potential can change significantly when the property is connected to a well-defined hospitality concept.

The asset becomes valuable not only because of what it is, but because of what it enables.

India Is Well Positioned for This Shift

India has several structural advantages in the experience-led hospitality market.

The country has significant geographic diversity within relatively accessible travel corridors: mountains, beaches, forests, deserts, agricultural landscapes, heritage towns, pilgrimage destinations and wildlife regions.

It also has a deep cultural and culinary ecosystem that can be incorporated into hospitality concepts.

At the same time, domestic travel provides a large underlying demand base. ICRA expects Indian hospitality revenues to grow by 9–12% in FY2026, supported by domestic leisure travel, MICE, weddings and business travel.

Hotel companies are responding accordingly. In 2026, Indian operators have been increasing their focus on resorts across beach, wildlife, spiritual and hill destinations, with experiential leisure becoming an important part of expansion strategies.

This creates opportunities for independent owners and investors.

The future of Indian hospitality will not be limited to large branded hotels in major cities. Smaller, differentiated properties can compete effectively when they have a clear proposition and strong connection to their destination.

What This Means for Property Owners

For existing property owners, the experiential travel trend creates an opportunity to reconsider how an asset is positioned.

A property that is underperforming as a conventional hotel may have potential as something else.

A homestay could become a culinary destination.

A farmhouse could become an agricultural retreat.

A heritage property could become a cultural hotel.

A coastal property could develop around marine activities.

A mountain property could focus on outdoor experiences and wellness.

The objective is not to add activities simply to appear experiential.

The objective is to identify the underlying reason a guest would travel to the property and build the commercial model around it.

This requires discipline.

A property with too many disconnected experiences can become operationally complex and commercially unclear. The strongest concepts usually have a clear central proposition that informs accommodation, food, programming, design and service.

What This Means for Investors

For investors, experiential travel creates both opportunity and risk.

The opportunity is in identifying assets whose current value does not fully reflect their potential.

This may include:

• Underutilised hospitality properties
• Distressed hotels
• Large independent homes
• Heritage buildings
• Agricultural land with hospitality potential
• Existing resorts requiring repositioning
• Properties in emerging destinations
• Assets with strong natural or cultural characteristics

The risk is assuming that an attractive concept automatically creates a viable business.

Experience-led hospitality still requires sound fundamentals.

Access matters.

Infrastructure matters.

Seasonality matters.

Local regulations matter.

Water and power availability matter.

Construction costs matter.

Staffing matters.

Distribution matters.

And ultimately, the customer must be willing to pay enough to support the operation.

The experience is therefore not a substitute for commercial discipline. It is an additional layer of value creation.

Designing Properties Around Demand

The most important shift may be in the development process itself.

Instead of designing a property first and determining the guest experience later, developers can increasingly work backwards from demand.

The process can look something like this:

Identify the customer → understand the reason for travel → identify the destination opportunity → define the experience → design the property → build the operating model → determine the investment case.

This approach can produce very different properties from conventional hotel development.

It may result in fewer rooms.

It may prioritise communal areas over additional keys.

It may allocate more space to kitchens, gardens, workshops, wellness facilities or outdoor environments.

It may reduce the importance of traditional hotel amenities while investing heavily in one or two distinctive experiences.

The goal is not to maximise the amount of real estate built.

The goal is to maximise the commercial value created by the asset.

The Implications for Hospitality Real Estate

The convergence of hospitality and experiential travel is gradually changing the definition of a hospitality property.

A hotel is no longer necessarily just a collection of rooms operating within a building.

It can be a platform for experiences.

That distinction matters for investors, developers, owners and operators because it affects everything from site selection and acquisition to architecture, financing, operations, branding and exit strategy.

The broader investment market is already reflecting stronger confidence in hospitality. JLL expects global hotel investment activity to strengthen in 2026, while identifying experience-led, high-quality assets as an increasingly important area of investor interest.

In India, the combination of rising room rates, expanding domestic travel, limited quality supply in many markets and increasing investment outside major cities creates a particularly interesting environment.

The opportunity is not simply to build more hotels.

It is to build properties that give people a reason to travel.

The Property Opportunity Ahead

Experiential travel does not eliminate the importance of conventional hospitality fundamentals. It changes the hierarchy of what makes a property competitive.

Location remains important.

Architecture remains important.

Service remains important.

Financial performance remains important.

But increasingly, differentiation comes from the relationship between the property, its surroundings and the guest's reason for being there.

For owners and investors, this creates a new way to look at hospitality real estate.

Instead of asking only whether a property can accommodate guests, the better question is whether it can create demand.

Properties that can answer that question convincingly may have an advantage in a market where travellers are becoming more selective and capital is becoming more focused on differentiated assets.

That is why understanding the relationship between property, destination, experience and demand is becoming increasingly important for anyone buying, selling, developing or operating hospitality real estate.