The Indian hotel industry is poised to witness a 7-9 per cent revenue growth in the fiscal year 2025, slightly down from the expected 14-16 per cent growth in FY2024, according to ICRA (Investment Information and Credit Rating Agency). The sustained demand for domestic leisure travel, coupled with the resurgence of meetings, incentives, conferences, and exhibitions (MICE), including weddings and business travel post the election period, is projected to be the driving force behind this positive outlook.

ICRA estimates premium hotel occupancy across India to reach decadal highs of approximately 70-72 per cent in both FY2024 and FY2025, showcasing a steady recovery from 68-70 per cent in FY2023. Average room rates (ARRs) for premium hotels are expected to rise to ₹7,200-7,400 in FY2024 and further to ₹7,800-8,000 in FY2025. Despite this increase, the revenue per available room (RevPAR) is forecasted to remain at an 8-12 per cent discount to the peak observed in FY2008 in FY2024, converging towards the FY 2008 peak in FY2025.

Domestic tourism continues to be the primary demand driver, maintaining its significance in FY2024 and expected to persist in the near term. However, foreign tourist arrivals (FTA) are yet to recover to pre-Covid levels, contingent upon the global macroeconomic environment.

Vinutaa S, Vice President and Sector Head – Corporate Ratings, ICRA Ltd, highlighted that demand is anticipated to remain robust in FY2025 due to healthy consumer sentiments and stable corporate performance. Specific locations, competition dynamics and property-related factors will influence hotel-specific demand. Gateway cities like Mumbai and NCR are expected to benefit, with occupancy rates surpassing 75 per cent in both FY2024 and FY2025, driven by transient passengers, business travellers, and MICE events.

Despite the positive outlook, the industry is not without challenges, ICRA said. The looming election period in FY2025 may temporarily impact business travel. However, the overall medium-term outlook remains positive, supported by factors such as improved infrastructure, enhanced air connectivity, favourable demographics, and the opening of new convention centres in recent years.