Hospitality Revenue Surge

India’s Hospitality Industry Set to Surpass ₹1 Lakh Crore Revenue in FY26

India’s hospitality industry is on a robust growth trajectory, with projections indicating that it will surpass the ₹1 lakh crore revenue mark in the fiscal year 2025-26 (FY26). This optimistic outlook is supported by a study from Rubix Data Sciences, which anticipates a steady compound annual growth rate (CAGR) of 10.5%, potentially elevating the industry’s revenue to ₹1.1 lakh crore by FY27.

The sector’s resurgence is evident in the significant recovery from the pandemic-induced lows. Occupancy rates have climbed from 35% during the pandemic to 68% in FY24, with expectations to reach 73% by FY27. This rebound is attributed to a surge in domestic travel, the return of international tourists, and the expansion of the Meetings, Incentives, Conferences, and Exhibitions (MICE) segment.

Premium and luxury hotels are at the forefront of this growth. Five-star deluxe hotels have experienced the highest occupancy rates, reaching 69.2% in FY24, and have led in Average Daily Rate (ADR) growth with a 10% CAGR. This trend reflects a consumer shift towards premium experiences, with travelers willing to invest more in superior amenities and services.

The industry’s expansion is further supported by a robust pipeline of over 80,000 new hotel rooms expected over the next five years. More than half of this supply will cater to the Upper Midscale and Midscale Economy categories, addressing the rising demand for quality yet affordable accommodations, especially in Tier 2 and Tier 3 cities.

However, challenges persist. High land prices, escalating construction costs, and lengthy project timelines pose significant hurdles for hoteliers. Despite these challenges, the industry’s outlook remains positive, with demand expected to outpace supply, driving continued growth and investment in the sector.

In summary, India’s hospitality industry is poised for significant growth, driven by a combination of increased domestic and international travel, a shift towards premium experiences, and a strong development pipeline. With strategic investments and a focus on quality service, the sector is well-positioned to achieve and potentially exceed the projected revenue milestones in the coming years.

Reference