India hospitality sector revenue to grow 9, 12% in 2025, 26: ICRA report

India's hospitality sector revenues would grow 9, 12 pct in 2025, 26, helped by continued demand in all segments, the report said on Wednesday.

The Indian hospitality sector is expected to continue generating good operating results in FY26, with domestic leisure travel, MICE (Meetings, Incentives, Conferences, and Exhibitions) activity, weddings and strong corporate demand being the main factors, said rating agency Icra in a report.

However, the Icra report said the prospects for growth in the hospitality sector are still quite positive even in view of the high base of FY25.

Pan, India premium hotel occupancy is forecasted at 72, 74 pct in FY26, as against 71, 73 pct achieved during the first 11 months of this fiscal year.

Average Room Rates (ARRs) are expected to rise to Rs 8, 200, 8, 500 per night, from Rs 8, 000, 8, 200 in FY2025, supported by ongoing good demand conditions and strong pricing power.

Premium room stock in 12 main cities is projected to increase by only 5, 6 pct p.a. over FY25, FY26, lagging behind the estimated demand growth of 8, 9 pct.

The demand-supply imbalance is likely to persist over the next 2-3 years, supporting occupancy levels and rate growth.

According to the report, demand drivers have diversified materially and now span corporate travel, weddings and social events, MICE activities, concerts, sports events, religious tourism and leisure-led travel to tier II and III cities.

This diversification has reduced the sector's vulnerability to global and cyclical shocks, it added.

Hotel companies are increasingly adopting asset-light expansion models through management contracts and franchise arrangements, said the report.

These models generate fee-based income with lower capital intensity, improve return on capital employed and support stronger free cash flow generation, added the report.