India Ratings and Research (Ind-Ra) expects India’s hotel sector to sustain its structural upcycle in FY27, with revenue per available room (RevPAR) remaining resilient across its rated portfolio despite moderating growth and geopolitical headwinds. Occupancy for Ind-Ra’s peer set is expected to remain around FY26 levels (nearly 74%), supported by a strong leisure demand, social events and a shift in consumer spending towards experiences over goods, although corporate travel may soften due to oil-led cost pressures. Demand-supply growth of 10%–15% yoy is likely to support healthy cash flows across rated entities, even as average room rate (ARR) growth approaches its cyclical peak, signalling pricing stabalisation. Operating cash flows are expected to remain stable, supported by an improved revenue mix. Overall, Ind-Ra expects its rated portfolio to maintain strong credit profiles, with balance sheets adequately positioned to absorb near-term macroeconomic shocks.

“Our baseline estimates on the hotel sector demand and supply growth range from 10%-15% yoy in FY27, leading to sustained robust operating cashflows even as RevPAR growth normalises. Key industry players have focused on brownfield investments and leasing models to swiftly add capacity and capitalise on strong spending trends. We further expect major hotel operators to continue outperforming the industry in FY27, on back of continued industry consolidation. Within segments, leisure and luxury are likely to remain more resilient than the premium and business. Despite strong supply additions, the balance sheet leverage is likely to remain low, with the capacity to absorb the risk of a near-term oil shock,” says Mahaveer Shankarlal, Director, Corporates, Ind-Ra. 

Leisure-led Demand to Sustain Portfolio Performance; Corporate Travel Faces Oil-Led Risks: Ind-Ra expects continued robust demand momentum across its rated portfolio in FY27, with both demand and supply growing 10%–15% yoy, sustaining occupancy at around FY26 levels (nearly 74%) for its peer set of 13 listed hotel companies. Leisure travel, weddings, and social events will continue to anchor demand, supported by a structural consumer shift towards experience-led spending, although wedding days are marginally lower yoy. However, geopolitical tensions, particularly the Middle East conflict and the resulting oil shock, could weigh on corporate travel demand across rated entities due to rising cost pressures, leading to a divergence between strong leisure demand and relatively softer business segment performance.

Pricing Cycle Peaks; RevPAR to Normalise, but Cash Flows Remain Strong: Ind-Ra believes ARR growth across its rated portfolio is nearing its peak, following a 5%–8% increase in FY26 and broader growth of 2%–13% across the peer set. Consequently, RevPAR growth is expected to normalise in FY27, although absolute levels will remain healthy. The agency continues to assume a lower through-the-cycle ARR in its rating case relative to prevailing elevated levels, indicating limited further upside from pricing. Nevertheless, strong underlying demand and scale benefits are expected to sustain robust operating cash flows across rated companies, even amid moderating RevPAR growth.

Stable Profitability; Expansion and Consolidation May Marginally Increase Leverage: Ind-Ra expects EBITDA margins across its rated portfolio to remain stable to marginally lower at 39%–40% in FY27 (FY25: 39%), supported by a favourable revenue mix including banquet, food & beverage, and management contract income. The ongoing upcycle has accelerated capacity additions across rated entities through brownfield expansions, asset upgrades, leasing models, and international expansion in gateway cities. Additionally, rising M&A activity and increasing institutional ownership are driving industry consolidation, with larger players likely to outperform the broader market. While these expansion strategies may lead to a marginal uptick in leverage, balance sheets across the rated portfolio remain comfortable and retain sufficient cushion to absorb near-term macroeconomic risks, including oil price volatility.