ICRA’s Hospitality Outlook Shifts—Is the Boom Finally Slowing?

Image Source: Travel Trends Today

ICRA has adjusted its outlook for India’s hospitality sector from ‘Positive’ to ‘Stable’, citing a moderation in growth after three years of doubledigit expansion. The industry, which thrived on strong domestic demand and MICE (Meetings, Incentives, Conferences, and Exhibitions) events, is now expected to grow at a 6–8% rate in FY2026, reflecting a return to normalcy.

Key Highlights:

Revenue Growth Moderation: After robust expansion from FY2023 to FY2025, the sector’s revenue growth is expected to stabilize at 6–8% YoY in FY2026.
Occupancy Trends: Premium hotel occupancy is projected to hold at 72–74%, slightly above the 70–72% levels seen in FY2024 and FY2025.
Room Rates on the Rise: Average room rates (ARRs) for premium hotels are forecasted to increase to ₹8,200–8,500, up from ₹8,000–8,200 in FY2025, driven by limited supply and ongoing refurbishments.
Domestic Tourism as a Key Driver: While foreign tourist arrivals may remain subdued in the short term, domestic travel continues to fuel demand, supported by improved infrastructure and air connectivity.
Financial Stability: Operating margins for major hotel companies are expected to remain rangebound at 34–36%, aided by cost rationalization and assetlight expansions.

Despite the slowdown, the sector remains resilient, with strong domestic demand and infrastructure improvements expected to sustain longterm growth.

Sources: ICRA Report, Economic Times, BW Hotelier.