India's hotel industry to see stronger growth in H2 FY27: Report

India's hotel industry is set for stronger growth in H2 FY27, driven by domestic leisure, corporate, and international travel. The sector showed resilience in Q1 with 11-13% RevPAR growth despite geopolitical issues, says a PhillipCapital report.

India's hotel industry is projected to experience stronger growth in the second half of FY27, driven by robust domestic leisure demand and a steady rebound in corporate and international travel, PhillipCapital said in a sector report.

Q1 FY27 Performance Highlights

The hospitality sector remained resilient in the first quarter despite geopolitical disruptions, with industry occupancy rising 2-4 percentage points year-on-year, average room rates (ARR) increasing 6-8 per cent and revenue per available room (RevPAR) growing 11-13 per cent, according to the report.

Future Growth Drivers and Outlook

The report noted that recovery could strengthen in the coming quarters, supported by a heavier wedding calendar, improving meetings, incentives, conferences and exhibitions (MICE) activity and the seasonal rise in international travel from October. Limited new hotel supply in key markets could also support room rates and RevPAR as demand improves.

"Demand outlook remains positive for Q2FY27, with domestic leisure demand staying strong, corporate travel gradually normalizing, and international demand recovering, as connectivity improves," the report said.

Leisure Markets Outperform Business Locations

The report noted that demand was stronger in leisure markets than in business-focused locations during Q1FY27. Rajasthan and Goa recorded high-20 per cent growth in RevPAR for Indian Hotels, while Chalet Hotels' resorts posted 19 per cent RevPAR growth compared with around 5 per cent for its business hotels. Leela Hotels' resorts also recorded 24 per cent RevPAR growth, against 14 per cent for city hotels.

Travel and Passenger Trends

Corporate travel remained softer, partly due to geopolitical uncertainty and tighter travel budgets, while international traffic was affected by disruptions linked to the West Asia conflict.

Air passenger movement data showed domestic traffic grew only 1.2 per cent year-on-year to 86.3 million in Q1FY27, while international traffic declined around 10.2 per cent to 17.9 million. Total passenger movement fell around 0.9 per cent to 104.2 million.

However, PhillipCapital said the monthly trend improved as the quarter progressed. Domestic passenger growth rose 7.7 per cent in May before normalising to a 1.2 per cent decline in June, while the decline in international traffic narrowed from 18.3 per cent in February to 4.7 per cent in June.

Company-Specific Performance

Among companies covered, Leela reported 28 per cent revenue growth and 41 per cent EBITDA growth in Q1FY27, while Indian Hotels' revenue rose 15 per cent and EBITDA increased 18 per cent. ITC Hotels' RevPAR rose 8 per cent, while Lemon Tree's occupancy improved by 314 basis points.

"The Indian hotel industry delivered healthy growth in Q1FY27 despite geopolitical disruptions and normal seasonality," the report said, adding that industry pricing remained intact even in markets where occupancy softened. (ANI)

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