Will Premium Hotel Occupancies in India Experience 5-6% Growth by FY26-FY28?
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Synopsis
India's premium hotel industry is set for impressive growth, with room additions expected at a CAGR of 5-6% from FY25 to FY28. Demand is surging, outpacing supply growth. This article explores the trends and projections shaping the future of India's hospitality landscape.
Key Takeaways
- India's premium hotel room inventory is projected to grow significantly by FY28.
- Demand growth is expected to outpace supply, creating a favorable market.
- Occupancy rates are set to improve substantially.
- Investment in hospitality continues to rise due to strong market conditions.
- Specialized segments, such as airport hotels, are expanding rapidly.
New Delhi, Nov 10 (NationPress) India is anticipated to experience a compound annual growth rate (CAGR) of 5-6% in the addition of premium hotel rooms from FY25 to FY28. Demand is projected to surge at a quicker rate of 8-10%, according to a report released on Monday.
This trend is expected to enhance occupancy rates in premium hotels by 200 basis points to 72-74%, with average room rates (ARRs) rising to Rs 8,200-8,500 in FY26, marking an increase of 3-6% compared to the previous year, as stated by ICRA, which maintains a ‘Stable’ outlook for the Indian hospitality sector.
“India’s premium hotel room inventory across twelve major cities exceeded the 1 lakh mark in FY2023 and is projected to surpass 1.2 lakh keys in the upcoming fiscal year,” remarked Srikumar Krishnamurthy, Senior Vice President and Co-Group Head–Corporate Ratings at ICRA.
Despite this growth, demand is expected to consistently outstrip supply additions for at least the next three years.
ICRA forecasts that the premium room inventory in these cities will grow at a CAGR of 5-6% during FY25-FY28, while demand will increase by 8-10% during the same timeframe.
The expansion of premium hotel room additions is widespread in this cycle, encompassing both tier 1 and tier 2/3 cities, due to the rising acceptance of the latter among travelers, alongside land and space limitations in tier 1 cities.
Following three years of double-digit revenue growth from FY2023 to FY2025, and with growth momentum persisting into the current fiscal year, the Indian hospitality industry has demonstrated resilience in recent times.
Driven by robust demand and improved financial performance of hospitality providers, the sector continues to attract investments for new supply and room upgrades to capitalize on emerging opportunities, the report indicates.
Particular segments within the hospitality sector, such as airport hotels and spiritual tourism, have generated significant interest in recent years, with 2,000-2,500 premium keys planned in each of these areas, accounting for approximately 10-15% of the total premium supply pipeline.
Point of View
I observe that the promising growth in India’s premium hotel sector reflects the resilience and adaptability of the hospitality industry. Emphasizing both demand and supply dynamics will be vital in navigating the evolving landscape, ensuring that we remain informed and engaged with this sector's growth trajectory.
NationPress
11/11/2025
Frequently Asked Questions
What is the expected CAGR for premium hotel room additions in India?
The expected CAGR for premium hotel room additions in India is 5-6% between FY25 and FY28.
How much is the demand for premium hotel rooms expected to grow?
The demand for premium hotel rooms is anticipated to grow at a faster pace of 8-10% during the same period.
What will be the projected occupancy rate for premium hotels?
Occupancy rates across premium hotels are projected to improve to 72-74%.
Are investments in the hospitality sector increasing?
Yes, strong demand and improved earnings profiles are leading to increased investments in supply additions and room upgrades.
What segments within hospitality are gaining attention?
Airport hotels and spiritual tourism are garnering significant interest, with many premium keys in development.
