India’s Hotel Sector Set For Rate Appreciation Amid Surging Demand Through 2026

Published on December 26, 2025

The hospitality industry in India is currently positioned at a significant crossroads, characterized by a robust momentum that is expected to carry forward into the coming years. It is observed that hotel room rates are projected to experience a steady appreciation of approximately six per cent by the year 2026. This upward trajectory is anticipated to bring average daily rates into a range of ₹9,400 to ₹9,700. Such a shift is largely attributed to the persistent rise in domestic tourism, coupled with a revitalization of the corporate travel sector. As the economic landscape of the country continues to expand, the demand for high-quality accommodation is found to be consistently outpacing the introduction of new inventory across most major geographical markets.

In the preceding year of 2025, a growth of seven per cent in room rates was recorded when compared to the figures from 2024. This data, provided by the consulting firm Hotelivate, highlights a period of significant expansion. Although the final month of 2025 was initially expected to maintain this strong performance, certain operational challenges within the aviation sector, specifically involving IndiGo, are likely to influence the final results. Consequently, the industry is expected to conclude the calendar year 2025 with occupancy levels stabilized between 65 and 67 per cent.

Market Dynamics and Economic Drivers

The projected growth for 2026 is underpinned by several fundamental economic drivers that continue to support the pricing power of hotel operators. According to insights from HVS Anarock, the Revenue Per Available Room (RevPAR) is forecast to reach a bracket of ₹6,300 to ₹6,800. This metric is a crucial indicator of the industry’s health, reflecting both occupancy levels and the average rates achieved. It is noted by Mandeep S. Lamba, the president and chief executive officer (South Asia) of HVS Anarock, that this growth is facilitated by a disciplined supply pipeline.

Furthermore, the absorption of office space in major metropolitan areas serves as a catalyst for increased business travel. As international arrivals continue to improve, the demand for premium lodging is further bolstered. The stabilization of major convention centers, including the Jio World Convention Centre, Yashobhoomi Convention Centre, and Bharat Mandapam, is instrumental in attracting incremental demand from the Meetings, Incentives, Conferences, and Exhibitions (MICE) segment. The increasing popularity of travel centered around sports and live entertainment events is also recognized as a significant contributor to the sector’s vitality.

Comparative Perspectives and Pricing Trends

While room rates for branded hotels in India have reached historic highs when measured in local currency, a different perspective is offered when these figures are viewed in dollar terms. It is pointed out by Manav Thadani, the founder and chairman of Hotelivate, that current rates still remain below the peak levels witnessed during 2007 and 2008. This distinction is important for understanding the global competitiveness of the Indian market.

A notable expansion is also being seen in the religious and spiritual tourism sectors. The growing footprint of branded hotels in these specialized centers is expected to provide an additional boost to average room rates, with increases estimated between five and six per cent. This diversification of the hospitality portfolio ensures that growth is not confined to traditional business hubs but is spread across various cultural and pilgrimage destinations.

Supply Pipeline and Segment Focus

The composition of the upcoming hotel supply is slated to undergo a strategic shift in 2026. It is highlighted that midscale and upper-midscale hotels will represent the largest portion of the proposed supply, accounting for more than 50 per cent of the total pipeline. This focus on the mid-market segment reflects a response to the growing needs of a broader demographic of travelers who seek value and quality.

The calendar for 2026 is also noted for having an unusually high frequency of long weekends. This occurrence is expected to stimulate short-haul leisure travel, particularly to destinations located in close proximity to major urban centers. Such trends provide a favorable outlook for hotel chains like Royal Orchid Hotels, which anticipates the maintenance of double-digit revenue growth. The introduction of new brands, such as ICONIQA in the upscale lifestyle segment, is intended to capture higher premiums. For instance, the flagship property at Mumbai T2 is expected to command rates between ₹12,000 and ₹16,000, thereby elevating the overall revenue metrics for the group.

Technological Integration and Future Outlook

To maximize yields during periods of peak demand, such as the wedding and convention seasons, the integration of advanced technology is being prioritized. AI-driven dynamic pricing models are being utilized by various hospitality groups to optimize revenue in real time. This technological adoption allows for more precise management of pricing strategies in a competitive market environment.

While a widespread decline in room rates is not anticipated, a normalization of rates may occur in certain tier-I markets or saturated leisure destinations. In these specific areas, intensified competition and the high base effect from previous years may lead to a more stabilized pricing structure. On the supply side, the industry has witnessed a record number of signings, with over 47,000 keys signed by November 2025. This represents a 31 per cent increase over the previous year, indicating a strong commitment from developers and investors.

The fundamentals for long-term growth in the Indian hospitality sector are considered to be firmly established. As demand continues to broaden across different geographies and travel purposes, the industry is steadily building the scale required to meet the evolving needs of both domestic and international visitors. The strategic expansion into various segments and the focus on enhancing the guest experience through infrastructure and technology are expected to sustain the sector’s upward trajectory through 2026 and beyond.