Indian hospitality industry poised for steady growth in FY26

Indian hospitality industry is set to grow steadily in FY26, driven by domestic travel, recovering foreign tourist arrivals, and the expansion of the Meetings, Incentives, Conferences, and Exhibitions (MICE) segment.

CareEdge Ratings projects a 7-8% increase in Revenue per Available Room (RevPAR) in FY26, following an 8-10% rise in FY25.

Average Room Rates (ARRs) are expected to hover above Rs 8,000, reaching Rs 8,400-8,600 in FY26, while occupancy levels are likely to stabilize between 66-68% from FY25 to FY27. However, supply-side constraints such as high land prices, escalating construction costs, and lengthy project timelines remain key challenges for hoteliers.

“India’s hospitality sector is adopting a measured approach to expansion, with greenfield capex growth expected to stay at 4-5% CAGR over the next few years, lower than demand, which is expected to grow in high single digits,” said Ravleen Sethi, Director, CareEdge Ratings. She noted that hotel brands are favoring asset-light models like management contracts to expand without significant upfront capital outlay.

India’s hotel pipeline remains robust, with over 80,000 new rooms expected over the next five years. More than half of this supply will be in the Upper Midscale and Midscale Economy categories, catering to the rising demand for high-quality yet affordable accommodations, particularly in Tier 2 and Tier 3 cities.

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The MICE segment is also witnessing strong momentum. «The introduction of large-scale convention centers such as Jio