Indian Hospitality Industry Growth: India’s hospitality sector likely to gain momentum in H2FY27 on strong leisure demand

India’s hospitality industry is expected to witness stronger growth in the second half of FY27, supported by strong domestic leisure demand and a steady recovery in corporate and international travel, according to an industry report by PhillipCapital.The hospitality sector remained resilient in Q1FY27 despite geopolitical disruptions. Industry occupancy increased between 2 and 4 percentage points year over year, while average room rates (ARR) increased between 6% and 8% and revenue per available room (RevPAR) grew between 11% and 13%, according to the report.

Weddings, MICE activity and international travel to support demand

PhillipCapital said the recovery could strengthen in the coming quarters, helped by a busier wedding calendar, an improvement in meetings, incentives, conferences and exhibitions (MICE) activity and a seasonal increase in international travel from October.The limited supply of new hotels in key markets could also support room rates and RevPAR as demand improves, according to the report.“Demand outlook remains positive for Q2FY27, with domestic leisure demand remaining strong, corporate travel gradually normalizing and international demand recovering as connectivity improves,” the report said.Demand in the first quarter was higher in leisure destinations than in business-focused locations.For Indian hotels, Rajasthan and Goa recorded high RevPAR growth of 20%. Chalet Hotels’ resorts saw RevPAR growth of 19%, compared to around 5% for its business hotels.Leela Hotels’ resorts recorded RevPAR growth of 24%, compared to 14% for its city hotels.

Corporate and international travel remained weak

Corporate travel remained weak during the quarter, partly due to geopolitical uncertainty and tighter travel budgets, while international traffic was affected by disruptions related to the West Asia conflict.Domestic air passenger traffic grew by just 1.2% year-on-year to 86.3 million in Q1FY27, while international traffic declined by around 10.2% to 17.9 million. Total passenger movement fell by around 0.9% to 104.2 million.However, PhillipCapital said the monthly trend improved as the quarter progressed.Domestic passenger growth rose 7.7% in May before normalizing to a 1.2% decline in June. The drop in international traffic also narrowed from 18.3% in February to 4.7% in June, according to the report.

Hotel companies report growth in the first quarter

Among companies covered by PhillipCapital, Leela reported 28% revenue growth and 41% EBITDA growth in Q1FY27.Indian Hotels’ revenue increased by 15%, while its EBITDA increased by 18%. ITC Hotels’ RevPAR grew 8%, while Lemon Tree’s occupancy improved 314 basis points.“The Indian hospitality industry achieved healthy growth in Q1FY27 despite geopolitical disruptions and normal seasonality,” the report said, adding that industry pricing remained intact even in markets where occupancy declined.