Indian hospitality industry’s RevPAR to reach decadal highs in FY2025 and improve further in FY2026: ICRA – ET TravelWorld

ICRA has projected a robust growth trajectory for the Indian hospitality industry in FY2025 and FY2026, with revenues anticipated to grow by 7-9 per cent YoY in FY2025 and 6-8 per cent YoY in FY2026. This growth follows a strong base in FY2024, driven primarily by sustained domestic leisure travel, business tourism, and MICE (Meetings, Incentives, Conferences, and Exhibitions) activities.

ICRA’s analysis predicts premium hotel occupancy will rise to approximately 72-74 per cent by FY2026, compared to 70-72 per cent in FY2025. Additionally, the average room rates (ARRs) for premium hotels are forecast to increase by 8 per cent YoY to INR. 7,800-8,000 in FY2025, with further improvements expected in FY2026, reaching INR. 8,000-8,400.

Vinutaa S, Vice President and Sector Head – Corporate Ratings at ICRA Limited, stated, “Demand is expected to remain strong across markets in Q4 FY2025 and FY2026 as underlying drivers remain healthy. Domestic tourism will continue to be the key driver, with foreign tourist arrivals improving depending on the global macroeconomic environment.

” She further highlighted that key cities like Mumbai and NCR are likely to see occupancy rates above 75 per cent in FY2025 and FY2026, benefiting from high transient passenger numbers, business travel, and MICE events.

The outlook for the medium-term remains optimistic, supported by improved infrastructure, air connectivity, and growth in MICE events. While supply is projected to grow at a moderate rate of 4.5-5 per cent CAGR, it is expected to lag demand, which will help sustain the revenue upcycle. The ongoing renovation and upgradation of hotel properties are also likely to support higher ARRs.While operating margins are expected to remain steady at 31-33 per cent for FY2025 and FY2026, compared to 33 per cent in FY2024, cost-control measures and operating leverage have played a significant role in improving margins since pre-Covid levels. These trends, combined with a strong demand base, bode well for the future of the hospitality industry in India.