Rating agency ICRA in its latest report has said that the revenues of the Indian hospitality industry are likely to grow by 9-12 per cent in the current fiscal year (FY26) despite the high base of FY25. The rating agency attributed the growth in the revenue to steady domestic leisure travel, Meetings, Incentives, Conferences, and Exhibitions (MICE) activity, weddings and resilient corporate demand.  

According to the report, pan-India premium hotel occupancy is estimated at 72-74 per cent in FY26, slightly higher than the 71-73 per cent recorded in the first 11 months of FY26. The Average room rates (ARRs) for premium hotels are projected to rise to Rs 8,200-8,500 per night in FY26, after a healthy Rs 8,000- 8,200 in FY25, reflecting sustained demand and strong pricing power. Premium room inventory across 12 key cities is expected to grow annually at 5-6 per cent over FY25-FY26, trailing the estimated demand growth of 8-9 per cent. The demand-supply imbalance is likely to persist over the next 2-3 years, supporting occupancy levels and rate growth. 

The report highlighted that demand drivers have diversified materially and now span corporate travel, weddings and social events, MICE activities, concerts, sports events, religious tourism and leisure-led travel to tier II and III cities. This diversification has reduced the sector's vulnerability to global and cyclical shocks. Hotel companies are increasingly adopting asset-light expansion models through management contracts and franchise arrangements. These models generate fee-based income with lower capital intensity, improve return on capital employed and support stronger free cash flow generation.