Steady demand to drive 9-12 pc revenue growth in hospitality in 2025-26: Report

Mumbai, Mar 4 (PTI) India's hospitality sector is expected to post 9-12 per cent revenue growth in 2025-26, aided by steady demand across segments, a report said on Wednesday.

The Indian hospitality sector is expected to sustain healthy operating performance in FY26, supported by steady domestic leisure travel, MICE (Meetings, Incentives, Conferences, and Exhibitions) activity, weddings and resilient corporate demand, rating agency Icra said in a report.

The Icra report said the growth outlook for the hospitality sector remains favourable despite the high base of FY25.

Pan-India premium hotel occupancy is estimated at 72-74 per cent in FY26, compared to 71-73 per cent recorded during the first 11 months of the current fiscal year.

The Average room rates (ARRs) are projected to increase to Rs 8,200-8,500 per night, from Rs 8,000-8,200 in FY2025, aided by sustained demand conditions and healthy pricing power.

Premium room inventory across 12 key cities is expected to grow annually at 5-6 per cent over FY25-FY26, trailing the estimated demand growth of 8-9 per cent.

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. PTI SM DRR