India's hotel sector likely to gain momentum in H2FY27 on strong leisure demand

India's hotel industry is expected to see stronger growth in the second half of FY27, supported by robust domestic leisure demand and a steady recovery in corporate and international travel, according to a PhillipCapital sector report.The hospitality sector remained resilient in the first quarter of FY27 despite geopolitical disruptions. Industry occupancy rose by 2-4 percentage points year-on-year, while average room rates (ARR) increased 6-8% and revenue per available room (RevPAR) grew 11-13%, the report said.Weddings, MICE activity and international travel to support demandPhillipCapital said the recovery could strengthen in the coming quarters, aided by a heavier wedding calendar, improving meetings, incentives, conferences and exhibitions (MICE) activity and a seasonal increase in international travel from October.Limited new hotel supply in key markets could also support room rates and RevPAR as demand improves, the report said.“Demand outlook remains positive for Q2FY27, with domestic leisure demand staying strong, corporate travel gradually normalising, and international demand recovering, as connectivity improves,” the report said.Demand in the first quarter was stronger in leisure destinations than in business-focused locations.For Indian Hotels, Rajasthan and Goa recorded high-20% growth in RevPAR. Chalet Hotels' resorts posted 19% RevPAR growth, compared with around 5% for its business hotels.Leela Hotels' resorts recorded 24% RevPAR growth, against 14% for its city hotels.Corporate and international travel remained softerCorporate travel remained softer during the quarter, partly due to geopolitical uncertainty and tighter travel budgets, while international traffic was affected by disruptions linked to the West Asia conflict.Domestic air passenger traffic grew just 1.2% year-on-year to 86.3 million in Q1FY27, while international traffic declined around 10.2% to 17.9 million. Total passenger movement fell around 0.9% to 104.2 million.However, PhillipCapital said the monthly trend improved as the quarter progressed.Domestic passenger growth rose 7.7% in May before normalising to a 1.2% decline in June. The decline in international traffic also narrowed from 18.3% in February to 4.7% in June, according to the report.Hotel companies report growth in Q1Among the companies covered by PhillipCapital, Leela reported 28% revenue growth and 41% EBITDA growth in Q1FY27.Indian Hotels' revenue rose 15%, while its EBITDA increased 18%. ITC Hotels' RevPAR grew 8%, 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.Get the latest Business News and Live updates. Download the TOI app.