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According to the latest report of rating agency ICRA, India's hospitality sector may register revenue growth of 9 to 12 percent in 2025-26. The report said that the sector's performance will remain strong due to continued demand for domestic tourism, weddings, corporate travel, and MICE (meetings, incentives, conferences and exhibitions) activities. Despite the high base in FY25, the growth outlook is positive.

Expectation of increase in occupancy and room rates

Occupancy of premium hotels across the country is estimated to be 72-74% in FY26, whereas it was 71-73% in the first 11 months of the current financial year. Average room rate (ARR) may also increase to Rs 8,200 to Rs 8,500 per night, which was between Rs 8,000-8,200 in FY25. Strong demand and better pricing power are believed to be the reason for this.

Demand is high, supply is less

The number of premium rooms in the 12 major cities is estimated to grow by 5-6% every year during FY25-FY26, while demand may grow at the rate of 8-9%. This means that the gap between demand and supply may persist for the next 2-3 years, which will benefit the hotel industry.

new sources of demand

Now not only corporate travel, but also weddings, social events, concerts, sports events, religious tourism and the trend of visiting tier-2 and tier-3 cities is increasing the demand. Due to this, the impact of global or economic shocks on the sector has become less than before.

Emphasis on asset-light model

According to the report, hotel companies are now expanding through asset-light methods like management contracts and franchise models. This requires less capital, returns are better and the cash flow of companies remains strong.