With renewed inventory increasing attainable prices and the events calendar becoming richer, the sector is positioned for an even stronger second half.Channel checks indicate that October remained stable despite the clustering of festivals, while November delivered a RevPAR gain in the mid to high teens and December shows similar visibility. Industry-level expectations point to ARR growth of 9-11% and RevPAR growth of 12-15% in Q3-26, reflecting a broad trend.
Demand fundamentals further strengthened in 1HFY26 as business travel normalized, domestic tourism remained at high levels and MICE activity grew sharply.
Even with several headwinds – festivals offsetting business travel days, airline disruptions and patchy international arrivals – occupancy rates held steady, underscoring the depth of domestic demand.
Weddings, diplomatic events and large-scale conferences make 2HFY26 a high-intensity season, aided by India’s rising prominence as a host to global forums and cultural showcases. Travel data also points to a resilient air traffic environment, with passenger numbers improving year on year and airport hotels benefiting from longer stays due to flight rescheduling.
While airline operational issues limited some holiday traffic, the broader impact on hotel performance was limited as bookings were rescheduled rather than canceled.
A defining catalyst for the sector is the transformation of urban infrastructure, in particular the start-up of new airport capacity.
The upcoming Navi Mumbai International Airport marks a structural turning point, which will unlock a new demand corridor with a capacity of 20 million passengers in the first phase.
With the supply of branded rooms still limited in the region, the gap between supply and demand is expected to widen significantly as MICE activity expands around emerging commercial districts, new convention centers and improved road connections via link bridges and metro corridors.
The surrounding business landscape – from IT parks to corporate clusters – is expanding rapidly, providing multi-year visibility for hotel needs in both business and leisure categories. The region’s proximity to popular holiday destinations strengthens its potential as a dual-use hotel market.
Mumbai, one of India’s leading hospitality markets, is also positioned for a strong second half of FY26. The city’s events pipeline – including concerts, global sports tournaments, medical and technology conferences and major wedding dates – points to higher occupancy rates in luxury and luxury hotels.
The completion of the renovation ensures a renewed inventory at higher realizations, while the city continues to enjoy a structurally favorable balance between supply and demand. Industry reports predict stronger demand growth than supply for luxury hotels in the region during FY27, reinforcing upward pressure on ARR.
With an increasing concentration of large-scale events at the Jio Convention Center and a premium guest segment willing to pay for accessibility, the Mumbai Metropolitan Region remains one of the strongest hospitality micromarkets in India.
Overall, the Indian hotel sector is entering a high demand phase, supported by growing travel behaviour, stronger infrastructure connectivity and a deeply diversified events calendar.
The structural drivers – domestic tourism, weddings, cultural festivals, conferences and corporate mobility – remain firmly in place, while new offerings enter the market in a measured and regionally focused manner.
With room rates remaining at high levels, occupancy rates in key cities resilient and multiple demand drivers firing simultaneously, the sector appears well positioned to maintain healthy operating performance and deliver a broad growth cycle over the medium term.
Lemon Tree: Buy| Target Rs 200
Lemon Tree Hotels is well positioned to benefit from strong cyclical and structural tailwinds in the Indian hospitality sector, supported by robust MICE activity, rising business travel and healthy domestic demand.
Industry trends such as mid-to-high-teens RevPAR growth, solid ARR momentum and a strong wedding season strengthen operating leverage within the business-focused portfolio.
A key catalyst is the emerging Navi Mumbai International Airport, where limited supply of branded products and rapidly growing demand strategically position Lemon Tree’s planned 400-500 major expansion. Improved connectivity through the Atal Setu and the formation of new commercial clusters further enhance the visibility of the occupation.
Industry-wide tailwinds – normalization of airline capacity, continued domestic travel and heavy convention traffic – should keep RevPAR on an upward trajectory.
With an efficient cost structure, strong presence in key metros and a robust project pipeline, Lemon Tree is well poised for steady growth, improving returns and meaningful gains in high-potential markets such as Navi Mumbai.
Indian Hotels: Target Rs 880
Indian Hotels is well positioned to benefit from the broad recovery of the sector, supported by its strong brand equity, premium positioning and leading presence in major metros.
In the first half of FY26, it delivered the fastest revenue growth among peers, helped by ARR gains and resilient occupancy rates, with momentum expected to strengthen in the second half of FY26 on the back of heavy MICE activity, a busy wedding season and a resurgence in holiday traffic.
The Mumbai metropolitan region remains a key growth driver, with major global events, limited luxury offerings and renovation upgrades increasing price power.
Upcoming developments such as the Taj Bandstand and the opening of the Navi Mumbai International Airport will further increase demand due to increased business travel, conferences and transit stays.
Backed by structural tailwinds – robust domestic tourism, growing MICE demand, improved connectivity and limited premium offerings – IHCL is well positioned to leverage the next phase of sector growth and maintain its leadership in the luxury segment.
(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd)
(Disclaimer: Recommendations, suggestions, views and opinions expressed by experts are their own. These do not represent the views of the Economic Times)
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