According to an ICRA research released on Monday, the hospitality sector in India is anticipated to show a revenue rise of 6–8% in FY2026 on the high base established following three years of double-digit revenue expansion observed by the industry between FY2023 to FY2025.

According to ICRA, premium hotel occupancy in India is expected to remain between 72 and 74 percent in FY2026, which is marginally higher than the 70 to 72 percent levels observed in FY2024 and FY2025. Following a strong FY2025 average of Rs 8,000–8,200, the average room rates (ARRs) for luxury hotels are expected to increase to Rs 8,200–8,500 in FY2026 due to lagged supply increases and a number of hotels undergoing renovation, refurbishment, and upgrade.

Jitin Makkar, Senior Vice President of ICRA Limited, stated “After three years of strong demand, driven by favourable domestic leisure travel, demand from meetings, incentives, conferences and exhibitions (MICE), including weddings, and business travel, the growth in the Indian hospitality sector is forecast to normalise at 6-8 per cent year-on-year in FY2026.”

“Although the terror attacks in April 2025 and the increased unpredictability that followed in North and West India in May 2025 caused a spike in travel and MICE cancellations, the effects were mainly short-lived and regional. Following the conflict’s abatement, attitudes have recovered well in recent weeks,” he continued.

Following the terror strikes, it is anticipated that foreign visitor arrivals (FTAs) to India will remain low for the next few months before gradually increasing. According to the survey, domestic travel has been the main source of demand thus far and is probably going to continue to be so in the near future.

According to the report, the growth will be supported over the medium term by factors like improved air connectivity and infrastructure, favorable demographics, and the expected rise in large-scale MICE events, which has been aided by the opening of several new convention centers in recent years.

Despite slower revenue growth, the 13 large hotel companies in ICRA’s sample set are expected to generate range-bound operating margins of 34–36 percent for FY2026. Factors such as recent asset-light expansions and cost-reduction initiatives will continue to boost the margins.

Nonetheless, the sample is probably a mixed bag, relying on remodeling and rising staff costs in the face of rising demand. According to the analysis, balance sheet deleveraging has reduced interest expenses and is probably going to boost net margins and credit metrics.

In the last 24 to 30 months, more supply announcements and the restart of postponed projects have been made due to the current increase in demand. However, over the following 12 to 18 months, supply growth is anticipated to lag behind demand.

“The addition of room inventory is expected to expand at a compound annual growth rate (CAGR) of 4.5–5% between FY2023 and FY2026, according to ICRA’s premium room inventory database, which covers 12 major cities nationwide. Operating leases and management contracts account for a significant portion of the new supply.

Currently, supply addition in the premium micromarkets in metro areas and larger cities is limited by land availability concerns. “The greenfield projects are mostly being started in the suburbs, and the addition of premium hotel supply in these areas is mostly due to rebranding or property degradation,” Makkar continued.