India’s hospitality sector ends 2025 on a high, FY26 poised for strength

Hotel Representative Image (Source Unsplash)

The year 2025 was marked by strong positive momentum in the hospitality sector, despite geopolitical uncertainties, driven largely by the steady growth of corporate travel.

Both domestic and international business travellers contributed to improved occupancy levels and stronger weekday demand, reinforcing India’s standing as a preferred destination for business and business-related travel, said Tejus Jose, Director of Operations at ibis & ibis Styles India.

Checked-in-in-style

The year was shaped by a powerful convergence of spiritual, cultural, and experiential travel with spiritual tourism emerging as a key driver for hotels, noted K.B. Kachru, President, Hotel Association of India and Chairman- South Asia, Radisson Hotel Group.

Destinations such as Ayodhya, Jammu, Varanasi, Puri, Amritsar, and Tirupati witnessed exceptional footfall. "The historic Maha Kumbh further contributed to hotel occupancy and drove demand growth in Tier-II and Tier-III markets. International tourists saw a steady increase especially on India's spiritual routes creating opportunities to develop more such destination experiences," he added.

India also saw a new wave of youth-driven travel demand sparked by big-ticket concerts and global performances with major headliners by Coldplay, Alan Walker, and Ed Sheeran. Coldplay's concert in Ahmedabad, resulted in an estimated economic impact of Rs 641 crore. Rs 392 crore flowed directly into the city’s economy and the Goods and Services Tax (GST) revenue collected was Rs 72 crore. "This exemplifies how large-scale events can significantly boost local businesses, from hotels and restaurants to transport, retail, art and handicrafts," Kachru said.

On the other hand, 2025's hospitality performance at around 6 percent revenue growth fell short of the 7-9 percent expectation, with aviation shocks erasing late-year momentum and exposing over-reliance on air travel, pointed out Arjun Baljee, Founder of ICONIQA as well as President of Royal Orchid Hotels.

Surendra Kumar Jaiswal, President, The Federation of Hotel & Restaurant Associations of India (FHRAI) added that the absence of infrastructure status for the hospitality sector has materially constrained expansion, particularly for mid-scale and regionally focused hotel developers.

"Hospitality projects are inherently capital-intensive and operate with long gestation periods of 7–10 years, yet they continue to be financed under real estate lending norms. This results in higher borrowing costs, limited access to long-term capital, and tighter credit conditions, all of which weaken project viability."

This financing mismatch has slowed hotel development in emerging destinations, pilgrimage circuits, and Tier-II and Tier-III cities, despite strong demand indicators, Jaiswal added. "The sector’s ability to add quality capacity has therefore lagged actual market needs. Expansion strategies are increasingly focused on asset-light models, including management contracts and franchising, which allow brands to scale while controlling balance-sheet risk."

Setting sights on 2026

For 2026, the growth drivers for Indian hospitality are both clear and durable in 2026, said Dr. Sanjay Sethi, MD & CEO, Chalet Hotels.

"Business travel has returned with depth and predictability, domestic leisure continues to broaden and mature, and Meetings, Incentives, Conferences, and Exhibitions (MICE) and weddings remain powerful demand engines. Together, these segments are well positioned to sustain double-digit Revenue Per Available Room (RevPAR) growth for the industry," he added.

Next year what will differentiate this cycle is the quality of demand with longer stays, higher spend intensity and greater forward visibility, enabling asset-led hospitality platforms to plan and execute with far greater discipline, he said.

Brokerage firm ICRA expects occupancy of hotel firms to remain between 62-64 percent in FY26 versus 63.5 percent in FY25.

"The performance of the Indian hospital industry is expected to remain strong in FY26 on the back of healthy occupancy, said Mythri Macherla, Vice President and Sector Head, Corporate Ratings, ICRA Limited.

Kachru added that the hospitality sector is looking at sustained momentum and a clear outlook of continued expansion and resilience. Citing reports he said that India’s hospitality sector is expected to continue its rebound, with the broader branded-hotel pool seeing around 7-8 percent RevPAR growth in FY26, with Average Room Rate (ARR) rising to Rs 8,400–8,600, supported by robust domestic demand.