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Icra projects 6-8 pc growth for hospitality sector, downgrades outlook to 'stable'

Icra projects 6-8 pc growth for hospitality sector, downgrades outlook to 'stable'

Time of India2 days ago

Growth of India's hospitality sector is expected to "normalise" at 6-8 per cent in the current financial year, rating agency Icra said on Monday while downgrading the sectoral outlook to "stable" from positive.
The rating agency also stated that foreign tourist arrivals (FTAs) to India are expected to remain muted in the next few months in the aftermath of the terror attack at Pahalgam in Jammu and Kashmir, but are estimated to witness a gradual recovery thereafter.
However, domestic tourism has been the prime demand driver so far and is likely to remain the same in the near term.
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Factors, including improvement in infrastructure and air connectivity, favourable demographics, and anticipated growth in large-scale MICE events, with the opening of multiple new convention centres in the last few years, will support the growth over the medium term, Icra said.
According to the rating agency, the domestic hospitality sector's earnings and credit metrics are expected to remain stable in FY2026 with benefits from cost rationalisation measures and operating leverage.
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A "stable" outlook indicates a low likelihood of change in the near to medium term, whereas a "positive" outlook suggests a high probability of an upgrade in the near to medium term.
The rating agency estimates pan-India
premium hotel occupancy
to hold at 72-74 per cent in FY2026, slightly higher than the 70-72 per cent levels witnessed in FY2024 and FY2025.
The average room rates (ARRs) for premium hotels are projected to rise to Rs 8,200-8,500 in FY2026, after a healthy Rs 8,000-8,200 in FY2025 amid lagging supply additions and several hotels undergoing renovation, refurbishment and upgradation, the ratings agency said.
"After three years of strong demand, driven by favourable domestic leisure travel, demand from meetings, incentives, conferences and exhibitions (MICE), including weddings, and business travel, the growth in the Indian hospitality sector is forecast to normalise at 6-8 per cent YoY in FY2026," Jitin Makkar, Senior Vice President and Group Head - Corporate Ratings, Icra Ltd, said.
"While the terror attacks in April 2025 and consequent heightened uncertainties in North and West India in May 2025 had led to a surge in cancellation of travel/MICE, the impact has been largely temporary and localised. In recent weeks, there has been a healthy recovery in sentiments following the abatement of the conflict," Makkar added.
Icra's sample set, comprising 13 large hotel companies, is likely to report range-bound operating margins of 34-36 per cent for FY2026, despite a lower revenue growth.
The margins will remain supported by factors like cost-rationalisation measures and asset-light expansions in recent periods.
However, within the sample, it is likely to be a mixed bag, depending on renovations and an increase in employee expenses amidst growing demand.
"Land availability issues currently constrain supply addition in the premium micro-markets in metros and larger cities. The addition to premium hotel supply in these areas is largely on account of rebranding or property upgradation, and the greenfield projects are largely being initiated in the suburbs," Makkar said.

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‘Resume direct flights, reduce hotel tariffs to revive tourism in Kashmir'
‘Resume direct flights, reduce hotel tariffs to revive tourism in Kashmir'

Time of India

timean hour ago

  • Time of India

‘Resume direct flights, reduce hotel tariffs to revive tourism in Kashmir'

Srinagar: The travel trade industry has appealed to airlines to resume flights to Srinagar that were discontinued after the Pahalgam terror attack on April 22 so that tourism in Kashmir can revive. Tired of too many ads? go ad free now While all flights to Srinagar, Jammu and over two dozen other areas were suspended in May, as India conducted air strikes against terror hubs in Pakistan, some services including direct flights from Kolkata to Srinagar by IndiGo Airlines and Air India Express have not resumed after hostilities ceased on May 10. IndiGo has indicated that it will resume the direct flight from June 16. Last month, TOI wrote about the 'Chalo Kashmir' campaign, a strong community-tourism industry connect initiative launched by the Travel Agents' Association of India (TAAI), which handles around 4 lakh tourists from Kolkata in a year, around 40,000 of whom travel to Kashmir. Taking the campaign forward, TAAI started a new campaign called Rally for Valley to boost tourism in Kashmir. "We are in talks with the Union govt as well as airlines and hotel bodies to put a cap on tariffs that can help us shape attractive packages for tourists," said TAAI president Sunil Kumar. "As for safety, we are visiting the valley with our families. Tourists have nothing to fear. People here are among the most hospitable. This is the best time to visit the Valley," he added. Over 15 lakh tourists visited Kashmir last year. The Valley was packed with tourists again this year before the terror attack triggered mass cancellations. The downturn in tourists has hit Kashmiris hard. "In April, we were charging Rs 5,000 for a round trip to Pahalgam from Srinagar. Now we are taking tourists even for Rs 3,000," said Md Rouf, a driver. Restaurants like Lazeez, which had to turn down guests two months back, are now giving special offers to fill tables. Tired of too many ads? go ad free now "Very few rooms have been booked across several hotels. Had it not been for the terror attacks, these hotels would have been packed. These hotels should take a Covid-time-like approach and cut down on tariffs. We have set ourselves a target until Sept this year by when we intend to revive tourism back in Kashmir," said TAAI chairman (east) Anjani Dhanuka. The newly inaugurated Vande Bharat Express, travelling through the landmark Chenab Bridge, is also being promoted as a game changer. "Kolkata will host the first roadshow promoting Kashmir as a safe destination. We are also regularly updating our social media handles with snippets and current activities in popular destinations in Srinagar, Pahalgam, Jammu, Gulmarg, Sonmarg, and other places to encourage tourists from Kolkata," said Manav Soni, TAAI national committee member.

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