Lemon Tree Hotels: Scaling the Hospitality Ladder with Smarts, Not Bricks
A Strategic Evolution in the Hospitality Game
I have been following Lemon Tree Hotels for the past five years, and their recent earnings report makes it clear that, like much of the hospitality industry, they are shifting toward an asset-light growth model. This approach is evident in their expansion plans for the next five years—of the 88 hotels set to open, only two will be company-owned, while the remaining 86 will be managed or franchised. And as they say organization of a company reflects the product strategy(think Apple and Amazon) , Lemon Tree is re-organizing itself into holding company with one subsidiary that will own all assets and other subsidiary/subsidiaries that will be focusing on managed and franchised properties.
In India’s fast-evolving hospitality landscape, Lemon Tree Hotels stands out not for building towering properties but for mastering a smarter way to grow. Amid a digital revolution where online travel agencies (OTAs) dominate bookings and consumer preferences shift like sand, Lemon Tree is doubling down on an asset-light expansion strategy that’s as intriguing as it is effective. With a diversified portfolio spanning upscale Aurika, mid-tier Lemon Tree, and budget-friendly Keys, a pivot to franchise-driven models, and a reorganization mimicking Real Estate Investment Trusts (REITs), Lemon Tree is redefining how to scale without sinking capital into concrete. This blog dives deep into their playbook, spotlighting recent hotel openings, unpacking their strategy, and pondering what it all means for their future.
Diversification: A Brand for Every Traveler
Lemon Tree’s growth starts with a multi-brand approach that captures travelers across income brackets, a move that’s less about prestige and more about market coverage. Let’s break it down:
Aurika: This is Lemon Tree’s upscale offering, targeting luxury seekers who crave experience over economy. Take Aurika, Udaipur, a sprawling retreat overlooking Lake Pichola—perfect for destination weddings or high-rollers wanting a regal escape. Then there’s Aurika, Mumbai Skycity, launched in 2023 with 669 rooms near Mumbai’s international airport, catering to affluent business travelers and transit jet-setters. These properties scream indulgence, positioning Aurika against heavyweights like Taj and Oberoi.
Lemon Tree: The mid-market workhorse, split into Lemon Tree Premier and Lemon Tree Hotels, serves the pragmatic—business travelers, families, anyone wanting value without breaking the bank. Lemon Tree Premier, Delhi Airport, for instance, is a go-to for its proximity, modern amenities, and reasonable rates—a lifeline for corporate road warriors. It’s not flashy, but it’s reliable, and that’s the point.
Keys: The budget contender, with sub-brands like Keys Select, Keys Prima, and Keys Lite, targets the cost-conscious—pilgrims, backpackers, or road trippers. Keys Lite by Lemon Tree Hotels, Somnath, opened in May 2024 near Gujarat’s Veraval beach and Somnath Temple, is a lean 42-room operation offering no-frills comfort at a price that doesn’t sting.
This isn’t random diversification—it’s a deliberate hedge. Luxury might falter in a recession, but budget travel often holds steady. Business travel ebbs and flows with corporate budgets, while pilgrims keep Somnath humming year-round. By branding each segment distinctly—Aurika’s opulence, Lemon Tree’s consistency, Keys’ affordability—Lemon Tree builds loyalty across the board, ensuring it’s not tethered to one market’s whims.
The Asset-Light Pivot: Growth Without the Grind
Here’s where Lemon Tree’s strategy gets brilliant: it’s shedding the burdens of ownership for a lighter, more agile model. Instead of pouring cash into land and construction, it’s leveraging two franchise-driven approaches—Franchise-Owned, Company-Operated (FOCO) and Franchise-Owned, Franchise-Operated (FOFO)—to expand fast and wide. Let’s unpack these with fresh examples:
FOCO: Hands-On, Capital-Off
In the FOCO model, a franchisee owns the property, but Lemon Tree’s subsidiary, Carnation Hotels, runs the show—hiring staff, setting standards, ensuring the vibe matches the brand. The company collects management fees without tying up its own money.
Keys Lite by Lemon Tree Hotels, Somnath: Launched in May 2024, this 42-room property near Gujarat’s spiritual coast is franchise-owned but operated by Carnation. It’s a textbook FOCO play—Lemon Tree enforces quality (think crisp sheets and decent Wi-Fi) while the franchisee foots the real estate bill.
Lemon Tree Premier, Budhanilkantha, Kathmandu: Opened in April 2024, this 102-room gem marks Lemon Tree’s Nepal debut. Franchise-owned and Carnation-managed, it’s a mid-tier haven for travelers seeking comfort in the Himalayan foothills, all without Lemon Tree owning a brick.
Tigerland Safari - A Lemon Tree Resort, Chitwan, Nepal: Also launched in April 2024, this 35-room eco-resort caters to wildlife enthusiasts visiting Chitwan National Park. Another FOCO deal, it’s locally owned but run by Carnation, blending Lemon Tree’s operational polish with Nepal’s tourism boom.
FOFO: Hands-Off, Brand-On
In the FOFO model, the franchisee owns and operates, licensing Lemon Tree’s brand and systems for a revenue cut. It’s even lighter for Lemon Tree—no operational overhead, just pure branding power.
Lemon Tree Hotel, Nashik: Signed in September 2024 and slated for FY26, this upcoming property will be franchise-owned and franchise-run. Nashik’s pilgrimage and wine tourism draw makes it a smart bet, and Lemon Tree reaps fees without lifting a finger beyond the logo.
Lemon Tree Hotel, Gir, Gujarat: Inked in 2024 for an FY30 opening, this FOFO deal taps Gujarat’s wildlife tourism near Gir National Park, home to Asiatic lions. Franchisees handle the build and ops; Lemon Tree collects the upside.
Keys Lite by Lemon Tree Hotels, Vijayawada: Announced in September 2024 as the chain’s second Vijayawada outpost, this 42-room property, due in FY26, follows the FOFO model. It’s a budget play in Andhra Pradesh’s buzzing commercial hub, scaled via franchise muscle.
More Examples, More Momentum
The asset-light train keeps rolling. Keys Lite by Lemon Tree Hotels, Niman and Garoth, Madhya Pradesh, both signed on March 8, 2025, are 42-room FOCO properties along the Delhi-Mumbai Expressway, set for FY26. Franchise-owned, Carnation-managed, they’re poised to snag highway travelers. Lemon Tree Hotel, Dehradun, signed in 2023 and due by Q3 FY25, is an 80-room Lemon Tree Premier under a license agreement—another franchise win. Even upscale gets the treatment: Aurika, Surat, signed in 2024, will be franchise-owned and Carnation-operated, bringing luxury to Gujarat without Lemon Tree footing the bill.
The stats back this up: of Lemon Tree’s 112 hotels and 10,317 rooms as of early 2025, nearly 50% are managed or franchised, up from 32.7% in 2018. That’s not a tweak—it’s a transformation. Owning hotels means land costs, construction delays, and maintenance migraines. Managing or branding them? That’s high-margin, low-risk growth—think software margins, not real estate slog. Lemon Tree’s borrowing a page from Marriott or Hilton, tailoring it to India’s chaotic, opportunity-rich market.
The REIT-Like Reorg: Splitting for Strength
Lemon Tree’s not stopping at operations—it’s rethinking its structure. The plan: split into two entities, one asset-heavy, one fee-driven, echoing a REIT’s logic.
Asset-Heavy Arm: This holds the owned properties—like Aurika, Mumbai Skycity or Lemon Tree Premier, Delhi Airport. It’s the capital-intensive cash cow, generating revenue from leases or operations.
Management Fee Arm: This is the nimble scaler, running the FOCO/FOFO empire—think Keys Lite in Somnath or Lemon Tree in Nashik. It’s about brand equity and operational smarts, not property titles.
Why split? For one, it clarifies value. Real estate trades at different multiples than management—lumping them muddies the picture. Separate them, and investors see a stable property portfolio (REIT-esque) and a growth-hungry management engine. Focus sharpens too: the asset arm optimizes holdings, the management arm chases scale. Management hints the asset-heavy subsidiary (possibly Fleur Hotels) could be debt-free in two years, a big deal with ₹17 billion in debt as of late 2024. If listed, it’s a valuation unlock and a capital boost—smart, if they pull it off.
The Bigger Picture: Branding in the OTA Era
Zoom out, and Lemon Tree’s strategy snaps into focus against the backdrop of the hospitality industry’s digital transformation. Online travel agencies (OTAs) like Booking.com or Expedia have changed the game—travelers book through them, not directly with hotels, shifting power away from property owners. In this world, owning the customer relationship is everything, and branding is the weapon of choice.
Lemon Tree’s multi-brand approach—Aurika, Lemon Tree, Keys—lets it differentiate across segments, giving travelers a reason to choose its properties over a generic OTA listing. Meanwhile, the management fee model ensures it’s not just a landlord collecting rent—it’s a partner delivering consistent service and brand equity. That’s Aggregation Theory again: Lemon Tree isn’t just supplying rooms; it’s aggregating demand by owning the experience, even if someone else owns the walls.
The Bottom Line: A Bet on the Future
Lemon Tree Hotels is playing a fascinating game. Diversification spreads its bets across customer segments. The management fee pivot makes it asset-light and scalable. The REIT-like reorg clarifies its value and sharpens its focus. Together, these moves position Lemon Tree to thrive in a world where the internet—and the OTAs that dominate it—has rewritten the rules of hospitality.
Will it work? That depends. Aurika needs to prove it can compete in the luxury space. The management fee model must scale without diluting quality. The reorganization has to deliver the promised value unlock. But if Lemon Tree pulls it off, it won’t just be a hotel chain—it’ll be a case study in adapting to the digital age.
As I’ve said before, the internet changes everything. For Lemon Tree, it’s not just changing how travelers book rooms—it’s changing how a hotel company builds its empire. This is one to watch.
Most other Hotel chains these days following same strategy including Taj, so what's so unique about Lemon tree strategy. If you could highlight that, then that will help. This strategy is in works by Club Mahindra resorts as well since many years.