New Delhi– Premium hotel occupancy levels in India are projected to strengthen over the next three years as demand continues to grow faster than new supply, according to a report released on Monday.
ICRA estimates that demand for premium hotel rooms will expand at an annual rate of 8–10 percent between FY25 and FY28, while supply additions are expected to grow at a comparatively slower 5–6 percent CAGR. As a result, average occupancy across premium hotels is expected to rise by around 200 basis points to 72–74 percent during FY26.
Average room rates (ARRs) are also projected to increase to Rs 8,200–8,500 in FY26, representing year-on-year growth of 3–6 percent. The ratings agency has maintained a ‘Stable’ outlook for the Indian hospitality sector.
“India’s premium hotel room inventory across 12 major cities crossed 100,000 rooms in FY2023, and is set to exceed 120,000 rooms in the next fiscal,” said Srikumar Krishnamurthy, Senior Vice President and Co-Group Head – Corporate Ratings at ICRA.
However, he noted that rising travel demand will continue to outpace supply, supporting higher occupancy and pricing over the next several years.
Unlike past growth cycles, new premium hotel development is now more evenly distributed across both major metros and tier 2 and tier 3 cities. Factors driving this shift include increased traveler acceptance of emerging cities, alongside land and development constraints in larger metropolitan centers.
The hospitality sector has already experienced strong performance, with three consecutive years of double-digit revenue growth from FY2023 through FY2025. The momentum remains intact in the current fiscal, which continues to encourage investment in new hotel development and property upgrades.
Segments such as airport hotels and spiritual tourism are also seeing increased investor interest. Each of these categories accounts for an estimated 2,000–2,500 premium rooms under development, representing around 10–15 percent of the total upcoming premium supply pipeline, the report said. (Source: IANS)
