Hospitality sector eyes sustained growth, higher foreign tourist arrivals in 2026

As a new year begins, India’s hospitality sector is preparing for sustained growth, supported by strong domestic demand, expectations of higher foreign tourist arrivals than pre-COVID levels, and renewed hopes that the long-pending demand for infrastructure status for hotels will be addressed by the government.

Industry stakeholders said 2025 marked a period of renewed optimism, with 2026 expected to build on that momentum. The sector is likely to remain predominantly driven by domestic travel demand, a trend industry leaders described as structural rather than cyclical, backed by India’s stable macroeconomic environment.

Granting a harmonised infrastructure status to the hotel industry could unlock significant capital inflows by enabling easier access to financing, longer loan tenures and lower interest rates. This, industry players said, would help ease project delays linked to financial constraints and support faster development, particularly in emerging markets.

Such a reform would also strengthen India’s position in the global tourism landscape, aligning with the government’s vision of developing tourism into a major employment-generating sector by 2047 as part of the ‘Viksit Bharat’ goal.

“India’s robust macroeconomic environment continues to provide a strong foundation for the industry’s growth,” Hotel Association of India President KB Kachru told PTI. He pointed to a rising GDP trajectory, accelerated infrastructure development, including new airports, enhanced regional connectivity and upgraded rail networks, along with sustained government focus on tourism and destination development programmes.

Federation of Hotel & Restaurant Associations of India (FHRAI) President Surendra Kumar Jaiswal said the sector will continue to be largely domestic demand-led in 2026. He noted that domestic tourist visits account for over 85–90 per cent of total tourism volumes, making domestic travellers the most reliable segment for the industry.

“Over the past few years, rising disposable incomes, improved highway and regional air connectivity, and a growing preference for short-duration travel have significantly expanded the domestic travel footprint,” Jaiswal said.

Radisson Hotel Group Managing Director and COO, South Asia, Nikhil Sharma said India’s hospitality sector will remain domestic-led in 2026, with travellers increasingly seeking premium and experience-driven stays. He said occupancies remain stable, while higher average daily rates (ADRs) are supporting overall performance, with strong demand across NCR, Mumbai, Bengaluru, Pune, Udaipur, the wider Rajasthan circuit, Karjat and Lonavala.

Chalet Hotels Ltd Managing Director and CEO Sanjay Sethi said growth drivers for the sector remain clear and durable. “Business travel has returned with depth and predictability, domestic leisure continues to broaden and mature, and MICE and weddings remain powerful demand engines,” he said, adding that these segments are positioned to support double-digit RevPAR growth.

Royal Orchid Hotels Ltd President Arjun Baljee said the sector recorded around 6 per cent revenue growth in 2025, below the 7–9 per cent expectations, with aviation-related disruptions impacting late-year momentum. He said underlying fundamentals remain strong, citing domestic demand resilience, supply-demand imbalance in premium segments and growth in digital bookings.

While domestic travel continues to drive growth, industry leaders expressed confidence that inbound tourism will also contribute meaningfully in 2026. Jaiswal said India could reasonably expect foreign tourist arrivals to reach and sustainably exceed pre-COVID levels.

Foreign Tourist Arrivals stood at 9.52 million in 2023, representing 87.09 per cent of 2019 levels and a 47.89 per cent increase over 2022, indicating strong recovery momentum, he said.

The Leela Palaces, Hotels and Resorts CEO Anuraag Bhatnagar said inbound travel is on a gradual recovery path, supported by improving air connectivity, easing visa regimes and renewed global interest in India as a cultural and experiential destination.

Despite the positive outlook, industry players flagged persistent challenges, particularly the absence of infrastructure status for hotels. Sharma of Radisson Hotel Group said this remains a structural hurdle, limiting access to affordable long-term capital, especially in Tier II and III markets.

“Granting this status would meaningfully accelerate development and enable India to meet its tourism ambitions,” he said, adding that Radisson will continue a calibrated expansion in 2026, focusing on emerging leisure destinations, resort assets and secondary cities.

Bhatnagar said the lack of formal infrastructure recognition impacts access to long-tenure financing and increases the cost of capital for operators managing large-format properties. Roseate Hotels and Resorts CEO Kush Kapoor echoed this view, calling infrastructure status a long-standing challenge for a capital-intensive sector.

“Without infrastructure classification, we face higher borrowing costs and limited access to long-tenure financing,” Kapoor said, noting that this affects both the scale and pace of expansion.

Industry executives also pointed to the growing role of digital adoption in driving travel demand. Ebix Travel–Delphi World Money Chief Business Officer Ankur Sharma said 2025 marked a year of smarter planning and digital maturity, with UPI emerging as the fastest-growing payment mode.

Looking ahead, Thomas Cook (India) Ltd President and Country Head for Holidays, MICE and Visa Rajeev Kale said event-based travel is emerging as a key trend, driven by millennials and Gen Z travellers attending concerts, sporting events and cultural festivals.

Avis India Managing Director Aman Nagar said continued infrastructure development and positive travel sentiment are expected to support sector growth in 2026, creating opportunities to improve service quality and mobility solutions.

Estimates indicate employment in India’s tourism sector is projected to rise from 48 million jobs in 2024–25 to nearly 63 million by 2034.