Post-Covid Trends in Hotel Lending: What Has Changed

The COVID-19 pandemic reshaped both the hospitality sector and the dynamics of hotel lending. Lenders are reassessing how they evaluate, fund and manage credit to hotel projects. Amidst this evolving landscape, Tourism Finance Corporation of India (TFCI) offers valuable insight into these post-COVID shifts.

The hospitality sector in India post COVID is firmly on a high growth trajectory. The domestic demand surge, revival of international demand and development of newer niche destinations are giving boost to the sector. The branded hotel room inventory in the country has already breached 2 lakh mark in FY25 and is set to reach 3 lakh mark in the next five years. Central Government’s continued investment in transport infrastructure, sustainability practices and focused global tourism marketing initiatives will result in an inclusive  and sustainable growth of Indian hospitality sector.     

Hospitality finance now extends beyond traditional hotels and resorts and includes  wellness resorts, wedding destination resorts, spiritual centric hotels/resorts, heritage palace hotels, boutique hotels, conference hotels, villastays, homestays, medical support stays, BnB, eco-friendly hotels or resorts, etc. All international hotel management companies are active in India with varied brand options in economy, midscale, upscale and luxury segments matching the hotel and customer profile. The project cost for a greenfield hotel or resort project depends on various factors and may have large variance from standard cost of hotels in the past.  It is important for a lender to correctly assess the project cost, market/demand and profitability to take a sound long-term credit decision.

Most of the lending banks, financial institutions and NBFCs prefer stabilized operating hospitality assets for financing rather than greenfield ventures. The emphasis of the lenders for credit is stabilized operating levels, established profitability margins for debt servicing and adequate fixed asset cover. There is also intensified competition among lenders for these stabilized hospitality assets sometime derelict of emerging market or demand-supply scenario and asset upgradation requirements over the tenure of lending.  

Tourism Finance Corporation of India Limited a.k.a TFCI, being a tourism specialized lending institution, is actively providing lending to opportunities for greenfield, brownfield and operating hospitality and other tourism projects. TFCI with its 36 years’ experience in financing tourism sector not only understands the nuisances of setting up tourism projects but also appropriate capital outlays for greenfield, brownfield and modernization hospitality projects.  TFCI has several standard and tailored financial products with flexible repayment schedules for the hospitality sector, reflecting our mature understanding of the sector’s cyclical nature and importance of sustainable loan to result high return on capital. The pandemic has also accelerated the adoption of digital tools in credit assessment, online loan documentation and automated portfolio monitoring. TFCI underscores the role of technology in end-to-end evaluation, compliance and remote supervision, thereby strengthening data-driven discipline in hospitality lending. TFCI notes increasing hospitality interest in tier-2/tier-3 cities and towns and its advisory division carries out focused market analysis and brand-specific project and capital planning to result in a financially successful venture.

In FY 2025, TFCI sanctioned loans of ₹1,600 crore and disbursed loans of ₹915 crore, with around 61 percent directed toward tourism and hospitality ventures. In FY2025, TFCI has budgeted disbursement of ~ ₹1,500 crore highlighting continued financing support to hospitality ventures. TFCI feel proud to say that it aims to build a more resilient hospitality finance ecosystem to foster high growth of India’s hospitality sector and tourism economy.