India’s hospitality sector is set to maintain its growth momentum in FY2026, even after a strong performance in the previous fiscal, supported by resilient domestic demand and diversified travel segments. According to a recent release by ICRA, revenue growth for the industry is expected to remain healthy, driven by leisure travel, MICE activity, weddings and steady business travel.
ICRA projects pan-India premium hotel occupancy to remain stable at 72–74 per cent in FY2026, in line with levels recorded over the past two years. Average room rates for premium hotels are forecast to increase to INR8,200–8,500, compared to INR8,000–8,200 in FY2025, with demand and pricing power expected to extend through the second half of FY2026 and into FY2027.
Temporary flight disruptions following changes to Flight Duty Time Limitation norms in December 2025 had a limited impact on hotel demand, as travellers adjusted plans and strong wedding bookings offset potential losses. For the first nine months of FY2026, room occupancy is estimated at 69–71 per cent, with average room rates of INR 8,100–8,200, while Q3 FY2026 saw robust occupancy levels of 76–78 per cent.
ICRA attributes the sector’s resilience to a structural shift towards domestic demand, reducing dependence on foreign tourist arrivals. Demand drivers now span corporate travel, social events, religious tourism, concerts, sports, MICE and leisure travel across Tier II and III cities.
With supply growth lagging demand, hotels continue to benefit from pricing power and elevated revenue per available room. The agency also noted a growing preference for asset-light models such as management contracts and franchises, even as ownership of marquee assets remains critical for brand positioning and long-term value creation.
