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India's hospitality industry is expected to record a 7-9 per cent year-on-year revenue growth in the current financial year after posting an estimated 11 per cent expansion in the previous fiscal, according to ICRA. The rating agency expects premium hotel occupancy to remain stable while average room rates are likely to rise further. Although geopolitical tensions, particularly the West Asia conflict, have affected foreign tourist arrivals, the sector continues to remain resilient as domestic travel remains the primary demand driver. However, prolonged global uncertainties and inflationary pressures could pose risks to the industry's performance.
India's hospitality industry is expected to witness a 7-9 per cent year-on-year revenue growth in the current financial year ending March 2027 after registering an estimated 11 per cent growth in the previous financial year, according to a report released by rating agency ICRA.
The assessment is based on ICRA's analysis of 15 large premium hotel companies, which together account for a major share of the country's hospitality sector revenues.
The rating agency expects occupancy levels across premium hotels in India to remain stable at 72-74 per cent during FY2026-27, similar to the levels recorded in FY2025-26. At the same time, Average Room Rates (ARRs) are projected to improve further to around INR 8,600-8,800 during the current fiscal from INR 8,200-8,500 in the previous year, supported by sustained demand across business and leisure travel segments.
ICRA also expects the operating margins of the hotel companies in its sample to remain healthy at 34-36 per cent during FY2026-27. While this is slightly lower than the 37 per cent margin reported in FY2025-26, profitability is expected to remain strong despite rising operating costs.
The report noted that inflationary pressures and operational disruptions linked to the ongoing West Asia conflict remain key risks for the sector. If geopolitical tensions continue for a prolonged period, travel sentiment could weaken further, affecting hotel demand, particularly from international travellers.
Foreign Tourist Arrivals (FTAs), which include foreign nationals visiting India but exclude Non-Resident Indians (NRIs), have traditionally played an important role in supporting demand for the hospitality sector. However, the report highlighted that international arrivals have remained under pressure over the past year.
According to ICRA, FTAs declined by 7.9 per cent during calendar year 2025 due to multiple factors, including terror attacks, subsequent retaliatory actions and broader geopolitical uncertainties. The situation was further impacted by the West Asia conflict, which affected inbound travel from March 2026 onwards. As a result, FTAs fell by 5 per cent year-on-year in March 2026 and by 14 per cent in April 2026.
Commenting on the sector's outlook, Srikumar Krishnamurthy, Senior Vice President and Co-Group Head – Corporate Ratings at ICRA Ltd, said the West Asia conflict led to airspace closures and moderated discretionary international travel, which affected foreign tourist arrivals to India. He added that FTAs declined by 9.1 per cent year-on-year during March-April 2026 and by 2.4 per cent during the first four months of calendar year 2026. However, he noted that the overall impact on the Indian hospitality industry remained limited because the sector continues to be largely supported by domestic travellers.
The Indian hospitality sector has witnessed a strong recovery over the past few years, driven by rising domestic tourism, corporate travel, weddings, meetings and large-scale events. Several hotel operators have also announced expansion plans across key business and leisure destinations to meet the growing demand. While international travel remains an important contributor, domestic tourism continues to provide stability to the industry's overall performance.
Source PTI
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