New Delhi— India’s hospitality industry is expected to grow 6–8% in revenue in FY2026, following three years of double-digit expansion, according to a report released Monday by ICRA.
Premium hotel occupancy across India is projected to hold steady at 72–74% in FY26, slightly up from 70–72% in the previous two years. Average room rates (ARRs) are expected to climb to ₹8,200–8,500, driven by limited new supply and ongoing hotel renovations and upgrades.
“After three years of robust growth supported by strong domestic leisure travel, MICE demand, weddings, and business travel, the sector’s momentum is expected to normalize,” said Jitin Makkar, Senior Vice President at ICRA.
He acknowledged that the April 2025 terror attacks had temporarily disrupted travel in North and West India, leading to cancellations, particularly in MICE segments. However, the impact was short-lived, and sentiment has rebounded in recent weeks.
While foreign tourist arrivals may remain subdued in the near term, domestic travel continues to be the primary growth engine and is expected to sustain demand. Factors such as improved infrastructure, enhanced air connectivity, and the launch of new convention centers are also expected to bolster medium-term growth.
A sample of 13 major hotel companies tracked by ICRA is projected to maintain operating margins of 34–36% in FY26, buoyed by cost efficiencies and asset-light expansion strategies. Although rising employee expenses and renovation costs may weigh on some operators, overall credit profiles are expected to improve thanks to reduced debt and interest expenses.
Despite rising demand, hotel supply is expected to grow more slowly, with premium room inventory across 12 key cities expanding at a 4.5–5% CAGR between FY2023 and FY2026. Most new additions are being made via management contracts and leases, especially in suburban areas, due to land constraints in metro centers. (Source: IANS)
