Hotel industry has quite a few good reasons to cheer about in 2026

Hotels in India will continue to see high occupancy but supply will lag demand.

A premium hotel room costing Rs 17,000 was too much for a Mumbai resident who recently travelled to Bengaluru for a business trip. This is nothing unusual. In fact, hotel rates have been significantly high in the post-Covid period.

Hotel rates in Bengaluru, for example, have already increased by about 25-30 percent as the city is preparing to host Aero India 2025 and Invest Karnataka 2025 next month, noted Aditya Sanghi, Co-Founder & CEO, Hotelogix, a cloud-based hotel management system.

Shyam Kumar, General Manager of DoubleTree by Hilton Bengaluru Whitefield, also emphasised that 2025 looks like a promising year for the hospitality sector.

“With the shift from three-day to four-day work weeks, we expect a surge in travel demand. The increase in both domestic and international traffic is likely to drive hotel rates up by 10-12 percent, with peak periods, like the Aero Show, pushing growth to 20 percent,” Kumar told Moneycontrol.

Premium and budget room rates

Last year, India's premium hotel room rates averaged between Rs 7,200 and Rs 7,400 per night, marking a 15 percent increase from the previous fiscal year, pointed out Dr Vikram Kamat, Chairman of the Vitskamats Group.

In the budget hotel category, it was around Rs 2,700-3,000 per night, a growth of around 7 percent. "The rates for 4-star hotels were in the range of Rs 3,700-Rs 4,400, including Tier II and III cities," he said.

Puneet Chhatwal, Managing Director and CEO of Indian Hotels Company Ltd (IHCL), also told Moneycontrol that 2025 looks promising with high-profile events like the Aero Show and the World Audio-Visual & Entertainment Summit (WAVES), both  in Bengaluru, and the Maha Kumbh in Prayagaraj, Uttar Pradesh, which will stimulate demand across various segments, including business and spiritual tourism.

'Luxury hotel rates in India still cheaper' 

He said luxury hotel rates in India are still much lower than those around the world, which leaves a lot of room for rates to increase in the coming years.

“Rates in India are about $200 a night when it comes to luxury consumption. These rates are still a third of the hotels in New York. We have maintained our rates, even though India and the rest of south Asia have traditionally been occupancy-driven markets, where occupancy has been considered the correct metric," Chhatwal said.

Somesh Agarwal, Chairman and MD at Radisson Blu Palace Resort & Spa, Udaipur, highlighted that.

At Radisson Blu Palace Resort & Spa, Udaipur, a popular property among tourists, the average room rates for 2024 exceeded Rs 24,000, reflecting a 9 percent growth, compared to 2023, noted Agarwal.

"Udaipur, as a destination, sees higher demand on auspicious wedding dates and during the winter season, which is its peak period. Certain months in 2024  saw a growth of up to 20 percent, compared to the previous year. However, the second quarter (April-June) of CY2024 saw an all-time low due to the elections. Overall, the year balanced out, reflecting consistent demand trends," he said.

At Jaypee Residency Manor Mussoorie, average room rates (ARR) during 2024 showed an 18-20 percent increase compared to 2023, noted property's General Manager, Piiyush Kapoor.

Average daily room rates

Ajay K Bakaya, Managing Director, Sarovar Hotels & Director, Louvre Hotels India, noted that the average daily rate reached Rs 5,500 last year.

For the Ramee Group, Mumbai, one of its key locations, saw a significant rise in hotel rates, with an increase of approximately 15 percent in 2024 over the previous year. "This growth aligns with the broader industry trend, where the average daily rate of hotels in India was around Rs 6,900 in fiscal year 2023," said Saurabh Gahoi, Senior Vice President.

In 2024, room rates during high-demand periods were, on average, 15-20 percent higher than standard rates, with some properties witnessing even greater spikes during festive seasons or significant local events, Gahoi added.

Average room rate (ARR) for premium hotels is projected to rise to Rs 7,800-8,000 for full-year FY25, up 8 percent year on year, according to rating agency ICR's analysis. It will go up further to Rs 8,000-8,400 in FY26. ARRs had hit a peak of Rs 8,200 in FY08, it added.

The pan-India premium hotel RevPAR (revenue per available room) is pegged at Rs 5,500-5,800 in FY25, against Rs 5,000-5,300 in FY24. The RevPAR is expected to increase further to Rs 5,800-6,200 in FY26.

Bakaya anticipates a 7 percent increase in room rates for January, setting a strong tone for the year. "Overall, we expect a 9 percent growth in room rates throughout the year.

In January 2025, premium hotel rates in India are approximately Rs 7,800-8,000 per night and will likely grow during the rest of the year, said Sanghi.

Jaypee Residency Manor's Kapoor expects 10-15 percent increase in room rates for 2025.

"This will be due to increased travel demand, premium offerings, evolving customer preferences, and improved connectivity from Delhi NCR due to the new expressway development."

Pricing trend in FY25

Sharing similar sentiments, Kamat said that the pricing trend witnessed in FY25 is continuing in January. "In the first nine months of fiscal year 2025, ARRs have risen to approximately Rs 7,800-Rs 8,000, reflecting continued growth in the hospitality sector."

The Indian hospitality industry’s total revenue is estimated to grow by 7-9 percent on-year in FY25 and 6-8 percent in FY26, over the high base of FY24, according to Vinutaa S, vice president and sector head, corporate ratings, ICRA.

Room rates are estimated to increase by 7-8 percent in 2025 on an annualised basis, especially as inventory growth remains slow, Kamat added.

The current supply pipeline is lower than the post-FY09 global financial crisis period, noted ICRA.

In the last two financial years, while room inventory increased by around 5 percent, demand grew by 8-10 percent and this trend is expected to continue in FY25 and FY26 with the pace of hotel room supply growing between 4 percent and 5 percent and demand increasing by 8-9 percent.

Vinutaa pointed out that the healthy demand uptick has led to a pickup in supply announcements and commencement of deferred projects in the last 24-30 months. Several global brands have made their entry into India.

"Unlike other markets, Udaipur is projected to witness a significant rise in room inventories across both luxury and mid-market segments. We remain optimistic about demand keeping pace with this growth. We forecast an increase in occupancy levels, approaching 70 percent, along with an average rate growth of 5 percent compared to last year," said Agarwal.