India's hotel industry recorded a strong improvement in operating performance during June 2026, with revenue per available room (RevPAR) rising 17-19 percent year-on-year, according to an ICICI Securities report citing data from HVS Anarock. The growth was driven by an approximately 11 percent increase in average room rates (ARR) and a 400-basis-point improvement in occupancy levels. The sharp year-on-year rise was also aided by a favourable base, as demand had been impacted by regional geopolitical tensions during June 2025.

The strong June performance helped the industry's same-store RevPAR register 11-13 percent year-on-year growth during the first quarter of FY27. Domestic travel demand remained resilient throughout the quarter, offsetting the temporary slowdown in foreign inbound tourism. Listed hotel companies also reported high-single-digit to high-teen RevPAR growth, reflecting healthy operating trends across the sector.

According to the report, demand momentum has continued into the second quarter of FY27, indicating sustained strength in the domestic hospitality market. However, the pace of recovery in foreign tourist arrivals during the second half of FY27 will remain an important factor to monitor, as it is expected to support meetings, incentives, conferences and exhibitions (MICE) activity in addition to domestic travel demand.

Monthly operating trends also remained encouraging. Industry ARR increased 5-7 percent year-on-year in April despite geopolitical uncertainties, while occupancy remained broadly stable, resulting in RevPAR growth of 5-6 percent. In May, ARR rose around 10 percent and occupancy improved by nearly 700 basis points to 63-65 percent, leading to RevPAR growth of more than 20 percent on a favourable base.

ICICI Securities maintained a positive medium-term outlook for the Indian hotel industry, supported by demand growth that is expected to outpace supply additions over the coming years. The brokerage expects hotel room supply to grow at 6-7 percent annually during FY26-FY30, while demand is projected to expand at around 10 percent annually. It also forecasts average room rates to grow at a high-single-digit CAGR of 6-8 percent during FY26-FY29, with occupancy expected to improve by 50-100 basis points in both FY27 and FY28, subject to the absence of prolonged geopolitical disruptions.

The brokerage believes new hotel additions will remain a major earnings driver and expects leading hospitality companies to deliver EBITDA CAGR of 15-20 percent over FY26-FY29. Management contracts are expected to remain the preferred expansion model, contributing more than 80 percent of incremental room additions, while hotel owners are likely to focus on acquiring operational assets and developing existing land banks.

ICICI Securities reiterated its Buy rating on several listed hospitality companies, including Indian Hotels Company, ITC Hotels, Schloss Bangalore, Chalet Hotels, Lemon Tree Hotels and Brigade Hotel Ventures, reflecting its confidence in the sector's long-term growth prospects.