India’s Hotel Sector Poised for Growth in H2FY27 Driven by Robust Leisure Demand
India’s hotel industry is poised for stronger growth in the latter half of FY27, driven by robust domestic leisure demand and a gradual recovery in corporate and international travel, according to a report by PhillipCapital. The hospitality sector demonstrated resilience in the first quarter of FY27, with occupancy rates increasing by 2-4 percentage points year-on-year. Average room rates (ARR) rose by 6-8%, while revenue per available room (RevPAR) grew by 11-13%.
Weddings, MICE Activity, and International Travel to Support Demand
PhillipCapital anticipates that demand will strengthen in the upcoming quarters, bolstered by a busy wedding calendar, improving meetings, incentives, conferences, and exhibitions (MICE) activity, and a seasonal uptick in international travel starting in October. The report notes that limited new hotel supply in key markets could further support room rates and RevPAR as demand improves. The outlook for Q2FY27 remains positive, with strong domestic leisure demand, a gradual normalization of corporate travel, and recovering international demand as connectivity enhances.
In the first quarter, leisure destinations outperformed business-focused locations. Indian Hotels reported high RevPAR growth in Rajasthan and Goa, with increases in the high 20% range. Chalet Hotels’ resorts saw a 19% growth in RevPAR, while its business hotels experienced around 5% growth. Leela Hotels’ resorts achieved a 24% increase in RevPAR, compared to 14% for its city hotels.
Corporate and International Travel Remained Softer
Corporate travel showed signs of weakness during the quarter, influenced by geopolitical uncertainties and tighter travel budgets. International traffic faced 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 approximately 10.2% to 17.9 million. Overall passenger movement fell by around 0.9% to 104.2 million.
Despite these challenges, PhillipCapital reported an improvement in monthly trends as the quarter progressed. Domestic passenger growth rose by 7.7% in May before normalizing to a 1.2% decline in June. The decline in international traffic also narrowed, decreasing from 18.3% in February to 4.7% in June.
Hotel Companies Report Growth in Q1
Leela Hotels reported a 28% increase in revenue and a 41% rise in EBITDA for Q1FY27. Indian Hotels saw a 15% revenue growth, with an 18% increase in EBITDA. ITC Hotels’ RevPAR grew by 8%, while Lemon Tree’s occupancy improved by 314 basis points. The report concluded that the Indian hotel industry achieved healthy growth in Q1FY27 despite geopolitical disruptions and seasonal challenges, with pricing remaining stable even in markets where occupancy softened.
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