India’s hospitality sector is expected to maintain its growth momentum in FY27, with industry revenues projected to rise by 7-9 per cent year-on-year, according to rating agency ICRA. Strong domestic travel demand is expected to cushion the impact of geopolitical uncertainties and weaker inbound tourism.
New Delhi: The projection follows an estimated 11 per cent revenue growth in FY26 and is based on ICRA’s analysis of 15 large premium hotel companies, which represent a significant share of the industry’s revenues.
Premium Hotel Occupancy to Remain Stable
ICRA expects premium hotels across India to maintain occupancy levels of around 72-74 per cent in FY27, broadly in line with the previous financial year.
Average room rates (ARRs), meanwhile, are projected to increase to INR 8,600-8,800, compared with INR 8,200-8,500 in FY26. Operating margins for the companies covered in the assessment are expected to remain healthy at around 34-36 per cent.
The agency noted that the sector continues to benefit from sustained demand, while limited premium room supply compared with demand is providing hotels with continued pricing strength.
Domestic Travel Supports Sector
The ongoing conflict in West Asia has affected international travel, including foreign tourist arrivals (FTAs) to India. FTAs fell 7.9 per cent in calendar year 2025, while arrivals declined by 5 per cent year-on-year in March 2026 and 14 per cent in April.
Despite the decline in international arrivals, ICRA said the impact on India's hotel industry has remained relatively contained because domestic travellers account for the majority of demand. The traditionally softer first quarter for the hospitality sector has also helped limit the immediate impact of weaker inbound tourism and reduced MICE activity.
Outbound Travel Also Affected
The geopolitical situation has also influenced outbound travel from India. Overseas travel declined 29 per cent year-on-year in March and 22 per cent in April 2026.
Higher airfares, a weaker rupee and government advisories discouraging discretionary international travel could encourage more Indians to opt for domestic holidays. This shift is expected to provide additional support to hotels and tourism businesses within the country.
Longer-Term Outlook Remains Positive
ICRA expects India's inbound tourism prospects to improve over the medium term, supported by better tourism infrastructure, expanding airport connectivity and government measures aimed at making travel easier.
The growing presence of international hotel brands and India's increasing role as a destination for business, investment and global events could further strengthen demand for premium accommodation.
Srikumar Krishnamurthy, Senior Vice President and Co-Group Head – Corporate Ratings, ICRA, said the West Asia conflict had disrupted air travel and moderated discretionary travel, affecting foreign tourist arrivals. However, he noted that the industry's dependence on domestic travellers has helped contain the impact.
ICRA expects the hospitality sector to avoid a prolonged downturn from the current geopolitical situation, although a continuation or escalation of the conflict could pose risks to its FY27 growth outlook.
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