India’s hotel industry is expected to see stronger growth in the second half of FY27, supported by robust domestic leisure travel and a gradual recovery in corporate and international tourism, according to a sector report by PhillipCapital. The hospitality sector remained resilient in Q1FY27 despite geopolitical disruptions, with industry occupancy rising by 2-4 percentage points year-on-year, average room rates (ARR) increasing 6-8%, and revenue per available room (RevPAR) growing 11-13%.
Hotel Industry Outlook For H2FY27
The report expects the recovery to gain pace in the coming quarters, aided by a busy wedding calendar, improving meetings, incentives, conferences and exhibitions (MICE) activity, and a seasonal increase in international travel from October. Limited additions to hotel supply in key markets could further support room rates and RevPAR as demand strengthens.
PhillipCapital said the outlook for Q2FY27 remains positive, with domestic leisure demand continuing to lead, corporate travel gradually returning to normal and international demand recovering as connectivity improves. Leisure destinations also outperformed business markets during Q1FY27. Indian Hotels recorded RevPAR growth in the high 20% range in Rajasthan and Goa, while Chalet Hotels saw a 19% rise in RevPAR at its resorts compared with around 5% at its business hotels. Leela Hotels’ resorts also recorded 24% RevPAR growth, compared with 14% for its city properties.
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Domestic Travel Leads Recovery
Corporate travel remained relatively subdued due to geopolitical uncertainty and tighter travel budgets, while international passenger traffic was affected by disruptions related to the West Asia conflict. Domestic air passenger traffic grew just 1.2% year-on-year to 86.3 million in Q1FY27, while international traffic declined 10.2% to 17.9 million. Overall passenger movement fell 0.9% to 104.2 million.
However, monthly trends showed signs of improvement as the quarter progressed. Domestic passenger growth reached 7.7% in May before declining 1.2% in June, while the fall in international traffic narrowed from 18.3% in February to 4.7% in June.
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Among the companies tracked by PhillipCapital, Leela recorded 28% revenue growth and 41% EBITDA growth in Q1FY27. Indian Hotels reported 15% revenue growth and an 18% rise in EBITDA, while ITC Hotels’ RevPAR increased 8%. Lemon Tree Hotels also reported a 314-basis-point improvement in occupancy. Overall, the report said the industry maintained healthy pricing despite geopolitical disruptions and seasonal softness in some markets.
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FAQs
How big is the hotel industry in India?
The hotel and broader hospitality market in India is valued at roughly $24 billion to $32 billion.
Is Taj owned by Tata?
Yes, Taj Hotels is owned by the Tata Group.
What are the top 5 hotels in India?
The top five luxury hotels in India, renowned for their royal heritage and world-class service, include the Rambagh Palace in Jaipur, The Oberoi Amarvilas in Agra, and the Taj Lake Palace in Udaipur.
