TBM Staff - Mumbai
Branded hotels in India are set to achieve double-digit revenue growth of 13-14% in FY25 and 11-12% in FY26, driven by demand surpassing supply, according to a Crisil Ratings report. Operating margins are expected to improve by 100-150 basis points this fiscal and remain steady in the next, supported by operating leverage and cost optimization initiatives. These projections build on a robust 17% revenue growth recorded last fiscal.
Domestic leisure and business travel will continue to dominate demand, with additional momentum coming from the MICE (meetings, incentives, conventions, and exhibitions) segment and a recovery in foreign tourist arrivals. Rising travel aspirations, improved regional connectivity, and the government’s ‘Meet in India’ initiative are key growth enablers. Average room rates (ARRs) are forecasted to increase by 6-7% this fiscal, adding to an already elevated base.
To address rising demand, branded hotels are accelerating room additions, primarily through asset-light management contracts. Supply is expected to grow by 20% over FY25 and FY26, with an 8-9% increase in rooms this fiscal and 11-12% next fiscal. A significant portion—65%—of the new rooms will be in leisure and non-metro destinations, driven by improving infrastructure and expanding traveler preferences.
Strong cash flows, asset-light expansion models, and equity raising efforts will ensure debt levels remain manageable, further enhancing the credit profiles of hotel operators. The industry’s focus on non-metros and emerging leisure hotspots reflects shifting traveler preferences and highlights the sector’s adaptability to evolving market trends.
