The hospitality industry is expected to grow by 7-9 per cent in FY25 and 6-8 per cent in FY26, over the high base of FY24, stated a report by ICRA. Further, pan-India premium hotel occupancy is estimated to improve to approximately 72-74 per cent in FY26 from around 70-72 per cent in FY25. The average room rates (ARRs) for premium hotels are projected to rise to Rs 7,800-8,000 for full-year FY2025 (up 8 per cent YoY) and subsequently improve further to Rs 8,000-8,400 in FY2026.
ICRA’s sample set, comprising 13 large hotel companies, is expected to report strong operating margins of 31-33 per cent for FY2025 and FY2026, in comparison to 33 per cent for FY2024 and 20-22 per cent pre-Covid.
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Demand in YTD FY2025 has been driven by sustained domestic leisure travel, demand from meetings, incentives, conferences and exhibitions (MICE), including weddings, and business travel, despite a temporary lull during the General Elections. Per ICRA, this trend is expected to continue over the next 9-12 months. Further, spiritual tourism and tier-II cities are expected to contribute meaningfully in FY2026 as well. Domestic tourism has been the prime demand driver in YTD FY2025 and is likely to remain so in the near term. Foreign tourist arrivals (FTA), it added, are yet to recover to pre-Covid levels and the improvement would depend on the global macroeconomic environment.
Vinutaa S, Vice President and Sector Head – Corporate Ratings, ICRA Limited, said, “Demand is expected to remain strong across markets in Q4 FY2025 and FY2026 as underlying drivers remain healthy. Hotel-specific metrics would, however, depend on location, competition and other property-related dynamics. Further, domestic tourism would be the prime driver, with FTA improvement depending on the global macro-economic environment. Mumbai and NCR, being gateway cities, are likely to report occupancy north of 75 per cent for full-year FY2025 and FY2026, benefitting from transient passengers, business travellers and MICE events. The ARRs are likely to witness healthy YoY increase in FY2025 and FY2026 across markets. This sharp rise in ARRs of premium hotels will result in spillover of demand to mid-scale hotels.”
Supported by a confluence of factors, including improvement in infrastructure and air connectivity, favourable demographics, and anticipated growth in large-scale MICE events,
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