India’s hospitality sector to see revenue grow of 6-8 pc in FY 2026, says ICRA

NEW DELHI: The Indian hospitality sector is projected to see a revenue growth of 6-8 per cent in fiscal year 2026, according to a report by Investment Information and Credit Rating Agency (ICRA). The agency also revised its outlook for the sector to ‘Stable’ from ‘Positive’ following three consecutive years of double-digit revenue expansion for the industry from FY2023 to FY2025.

Pan-India, premium hotel occupancy is estimated to remain robust at 72-74 percent in FY2026, a slight increase from the 70-72 per cent levels observed in FY2024 and FY2025. Additionally, the average room rates (ARRs) for premium hotels are expected to reach Rs 8,200-8,500 in FY2026, following healthy rates of Rs 8,000-8,200 in FY2025.

This rise in ARRs is attributed to lagging supply additions and ongoing renovation, refurbishment, and upgradation initiatives across several hotels. Jitin Makkar, senior vice-president and Group Head-Corporate Ratings, ICRA Limited said that, “After three years of strong demand, driven by favourable domestic leisure travel, demand from meetings, incentives, conferences and exhibitions (MICE), including weddings, and business travel, the growth in the Indian hospitality sector is forecast to normalise at 6-8% YoY in FY2026.”

Although foreign tourist arrivals are expected to remain subdued in the coming months due to the recent terror attacks, a gradual recovery is anticipated. While, domestic tourism, which has been the primary demand driver, is expected to continue leading the way in the near term.

Factors contributing to this growth include improvements in infrastructure and air connectivity, favorable demographics, and the projected increase in large-scale MICE events with the opening of new convention centers. Supply growth is expected to lag demand for the next 12-18 months. ICRA’s premium room inventory database for 12 key cities indicates a compound annual growth rate (CAGR) of 4.5-5.0% in room inventory addition from FY2023-FY2026.

A significant portion of this new supply is through management contracts and operating leases. Challenges in land availability in premium micro-markets of metros and larger cities are constraining supply, with new premium hotel supply largely coming from rebranding, property upgradation, and greenfield projects in the suburbs. (ANI)