Branded hotels are expected to achieve a 13–14% rise in revenue in FY25, according to Crisil Ratings.

India’s branded hotels industry is very optimistic to expand in the coming years, as Crisil Ratings envisaged the revenue would grow at a compounded rate of 13–14% for FY 2025. The sector had shown a fabulous performance with 17% growth in the previous fiscal and is on track to maintain the same, backed by domestic leisure and business travellers, as well as revived international tourist arrivals.

Domestic and Business Travel

Regional travel, or domestic leisure travel, is steadily growing as better connections make it easier for people to travel, and more travelers have higher aspirations. The government’s “Meet in India” program has also helped boost the MICE (meetings, incentives, conventions, and exhibitions) sector.

Business travel is also picking up thanks to India’s strong economic situation and the return of corporate events. Foreign tourist arrivals are expected to surpass pre-crisis levels this year.

Asset-Light Expansion: A Game Changer

The asset-light management contract model has now become an industry standard for room additions, which reduces overhead expenses dramatically. That way, the industry is able to handle business cycles in the best way possible. The Crisil report points out that 60-65% of new room additions over this fiscal and the next fiscals will come through asset-light models, leading to a 20% supply expansion.

Crisil Ratings’ Associate Director, Pallavi Singh, noted that this model not only increases the speed of room additions but also increases the financial stability of hotel operators. 

Rising 6–7% this fiscal, the ARRs for branded hotels will level off to a much slower pace: 3–4% the following year if more rooms come online. Despite new capacities, the occupancy percentage is likely to sustain its position and is expected to stand at 74-75 % in FY26, a marginal decrease from the current fiscal increase.

Consequently, ID could change its focus towards emerging destinations. At present, non-metro and leisure destinations are driving the expansion wave, which make up 65% of new room additions.

Spiritual tourism and top metro cities will also see significant developments. This diversification reflects a growing demand for varied travel experiences and improved infrastructure in emerging regions.

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Operational and Financial Health

The hotel industry is leveraging operating efficiencies and cost management strategies to sustain profitability. Higher adoption of technology and streamlined manpower are helping businesses transition to a leaner cost structure.

Crisil expects operating margins to improve by 100–150 basis points this fiscal, reaching 33–34%, and to remain stable in the next year. Furthermore, strong cash flows, asset-light expansions, and equity infusions are keeping debt levels under control, ensuring a robust credit profile for the sector.

While the outlook is optimistic, certain risks could temper growth. Rising airfares might deter leisure travelers, while an economic downturn could curb business travel. These factors necessitate proactive strategies to maintain resilience.