Indian Hospitality Industry Set for 7-9% Revenue Growth in FY27 Amidst West Asia Turmoil, ETTravelWorld
ICRA has projected the Indian hospitality industry‘s revenues to grow by 7-9 per cent year-on-year in FY27, following an estimated 11 per cent expansion in FY26, as resilient domestic travel demand continues to offset the impact of geopolitical uncertainties on inbound tourism.
The forecast is based on 15 large premium hotel companies that account for the majority of the sector’s revenues. According to the rating agency, pan-India premium hotel occupancy is expected to remain stable at 72-74 per cent in FY27, while average room rates (ARRs) are projected to increase to INR 8,600-8,800 from INR 8,200-8,500 in FY26. Operating margins are expected to remain healthy at 34-36 per cent, broadly in line with the 37 per cent reported in FY26.
ICRA noted that the West Asia conflict led to temporary disruptions in air travel and a moderation in discretionary travel, resulting in lower foreign tourist arrivals (FTAs). Foreign arrivals declined by 7.9 per cent in calendar year 2025, while FTAs contracted by 5 per cent and 14 per cent year-on-year in March and April 2026, respectively. Overall, FTAs in the first half of calendar year 2026 were 1 per cent lower than the corresponding period of the previous year.
Despite the decline in international arrivals, the impact on the hospitality industry remained limited because domestic travel continues to account for the majority of demand. ICRA also observed that the first quarter is traditionally a lean season for hotels, helping minimise the effect of lower inbound travel and reduced meetings, incentives, conferences and exhibitions (MICE) activity.
The report highlighted that outbound travel from India also moderated following the West Asia conflict, with overseas travel declining 29 per cent in March and 22 per cent in April 2026. Higher airfares, a weaker rupee and government advisories to limit discretionary foreign travel are expected to encourage more travellers to choose domestic destinations, supporting hotel demand.
Looking ahead, ICRA expects inbound tourism to strengthen over the medium term, supported by infrastructure development, expanding airport connectivity, government initiatives to simplify travel and India’s growing position as a destination for business, investment and international events. The entry of additional global hotel brands is also expected to enhance international visibility and support premium room rates.
Commenting on the outlook, Srikumar Krishnamurthy, Senior Vice President and Co-Group Head – Corporate Ratings, ICRA Limited, said:
“The West Asia conflict resulted in airspace closures and some moderation in discretionary travel, weighing on FTAs to India. However, the impact on the Indian hospitality industry remained contained as demand is largely driven by domestic travellers. The Indian hospitality sector is unlikely to witness a prolonged adverse impact from the West Asia conflict, given its strong reliance on resilient domestic travel demand.”
He added that ICRA expects premium hotel occupancy to remain at 72-74 per cent in FY27, with ARRs increasing to INR 8,600-8,800, although a prolonged geopolitical conflict could place pressure on these projections.
