Indian Hospitality Sector Primarily Driven by Revenue from MICE Sector

The Indian hospitality industry is poised for steady growth, with revenues expected to increase by 7-9% year-on-year (YoY) in FY25 and 6-8% YoY in FY26, according to investment and credit rating agency ICRA. This growth builds on a robust base established in FY24. The average room rates (ARRs) for premium hotels in India are forecasted to climb to ₹7,800-₹8,000 in FY25, marking an 8% YoY increase. This trend is expected to continue in FY26, with ARRs projected to rise further to ₹8,000-₹8,400. Operating margins for a sample of 13 major hotel companies are predicted to stabilize at 31-33% in FY25, slightly lower than the 33% seen in FY24 but significantly above the pre-COVID range of 20-22%. 

Sustained domestic leisure travel, along with demand from meetings, incentives, conferences, and exhibitions (MICE), including weddings and business travel, has driven the sector's performance in FY25. While the upcoming general elections might cause a temporary slowdown, the overall demand is expected to remain robust over the next 9-12 months. Spiritual tourism and the increasing prominence of tier-II cities are anticipated to play an influential role in FY26, adding diversity to the industry’s growth avenues. Domestic tourism remains the primary driver of demand, with foreign tourist arrivals (FTAs) yet to fully recover to pre-pandemic levels. Improvement in FTAs will depend on global economic conditions. 

Mumbai and the National Capital Region (NCR), as prominent gateway cities, are forecasted to achieve occupancy rates exceeding 75% in both FY25 and FY26. These cities will benefit significantly from transient passengers, business travelers, and a vibrant calendar of MICE events. As premium hotels experience sharp increases in ARRs, demand is expected to spill over to mid-scale hotels, further broadening the market’s growth prospects. 

Vinutaa S, Vice President and Sector Head for Corporate Ratings at ICRA, emphasized the resilience of demand across markets, projecting strong performance in Q4 FY25 and throughout FY26. Underlying drivers such as domestic tourism, strategic regional diversification, and the rise of tier-II cities are expected to sustain momentum. In conclusion, the Indian hospitality industry is on track for consistent growth, supported by a mix of domestic and regional factors. Continued recovery and expansion will depend on maintaining this momentum and adapting to global economic shifts.