India's hospitality companies' revenue to grow 7-9% in FY27, West Asia conflict poses downside risks: ICRA

India's hospitality industry is expected to witness 7 to 9 per cent revenue growth year-on-year in the current financial year ending March, following an estimated 11 per cent expansion in 2025-26, rating agency ICRA said on Tuesday.

The projection is based on ICRA's analysis of 15 large premium hotel companies, which account for a majority of the sector's revenues.

ICRA anticipates pan-India premium hotel occupancy to remain at 72-74 per cent in 2026-27, similar to 2025-26 levels, while Average Room Rates (ARRs) for premium hotels are projected to increase to Rs 8,600-8,800 in 2026-27 from Rs 8,200-8,500 in 2025-26, the rating agency said.


ICRA's sample set is likely to report operating margins of 34-36 per cent in 2026-27, broadly similar to the 37 per cent reported in 2025-26. However, inflationary or operational pressure arising from the West Asia conflict, along with a potential weakening in travel sentiment if the situation persists, remain key downside risks.

Foreign Tourist Arrivals (FTAs), comprising foreign nationals visiting India and excluding Non-Resident Indians (NRIs), have historically supported travel demand for the Indian hospitality industry.

In CY2025, FTAs declined 7.9 per cent, impacted by multiple headwinds, including terror attacks and the consequent retaliation, as well as broader geopolitical uncertainties. The West Asia conflict further weighed on inbound travel from March 2026, with FTAs contracting by 5 per cent and 14 per cent YoY in March 2026 and April 2026, respectively, the rating agency observed.

Srikumar Krishnamurthy, Senior Vice President and Co-Group Head - Corporate Ratings, ICRA Ltd, said, "The West Asia conflict resulted in airspace closures and some moderation in discretionary travel, weighing on FTAs to India. FTAs contracted by 9.1 pc YoY during March-April 2026 and by 2.4 per cent YoY in 4M CY2026 (January-April). However, the impact on the Indian hospitality industry remained contained as demand is largely driven by domestic travellers".