Revenue in India's hospitality sector is expected to grow 7-9 per cent year-on-year in the current financial year ending March 2027, following an estimated expansion of 11 per cent in 2025-26, according to rating agency Icra. The expected revenue growth follows an estimated expansion of 11 per cent in 2025-26. As reported by Icra, the Indian hospitality sector is unlikely to witness a prolonged adverse impact from the West Asia conflict, given its strong reliance on resilient domestic travel demand. The projection is based on Icra's analysis of 15 large premium hotel companies, which account for a majority of the sector's revenues.
The rating agency expects pan-India hotel occupancy to remain at 72-74 per cent in 2026-27, close to the previous financial year's level, while average room rates (ARRs) for premium hotels are projected to increase to ₹8,600-8,800 in 2026-27 from ₹8,200-8,500 in 2025-26. According to Icra's study of 15 large premium hotel companies, the operating margins of these companies are expected to be around 34-36 per cent, compared with 37 per cent in 2025-26. The projection is based on Icra's analysis of 15 large premium hotel companies, which account for a majority of the sector's revenues.
Foreign tourist arrivals (FTAs) declined 7.9 per cent in calendar year 2025, affected by terror attacks, subsequent military action and broader geopolitical uncertainties. As reported by Icra, FTAs contracted 5 per cent and 14 per cent year-on-year in March 2026 and April 2026 respectively, as the West Asia conflict led to flight disruptions, higher airfares and travellers avoiding discretionary travel. However, Srikumar Krishnamurthy, Senior Vice President and Co-Group Head - Corporate Ratings at Icra Ltd, noted that "the West Asia conflict resulted in airspace closures and some moderation in discretionary travel, weighing on FTAs to India. FTAs contracted by 9.1 pc YoY during March-April 2026 and by 2.4 per cent YoY in 4M CY2026 (January-April)." However, a recovery in FTAs was visible during May-June 2026 as airline operations gradually normalised and travellers adjusted to the new operating environment.
Despite the positive outlook, Icra expects the operating margins of the 15 companies covered by its study to be around 34-36 per cent, compared with 37 per cent in 2025-26. According to Srikumar Krishnamurthy, inflationary or operational pressures arising from the West Asia conflict, along with weaker travel sentiment if the conflict persists, remain key downside risks. The impact on the Indian hospitality industry remained contained as demand is largely driven by domestic travellers, with Q1 being generally a lean season for the sector. Foreign tourist arrivals, comprising foreign nationals visiting India and excluding Non-Resident Indians (NRIs), have historically supported travel demand for the Indian hospitality industry.
