The impact from the ongoing conflict in West Asia has been moderate so far, as the industry demand is largely driven by domestic travellers. Given that Q1 is generally the lean period for the industry, and the last fiscal had witnessed moderation owing to the cross-border escalations during this period, the YoY impact remains limited so far. However, the evolving geopolitical situation remains a key monitorable, with respect to its potential implications on business travel expenditure. Disruptions arising from LPG shortages have been largely contained, aided by the availability of piped gas infrastructure and adoption of alternative cooking solutions.

• ICRA estimates industry occupancy and average room rates (ARR) at 66-68% and Rs. 7,800-8,000, respectively in 2M FY2027 against 62-64% and Rs. 7,500-7,700, respectively in 2M FY2026, with the YoY growth supported by the base effect of Pahalgam attack. The advisory from the Government of India (GOI) to curb discretionary travel for conserving fuel consumption, and inflationary concerns can dampen demand to some extent. However, a potential shift from international travel could lead to increased spending on domestic travel in the near term. Impact on food & beverages (F&B) revenues has been largely contained by shifting to alternative cooking modes and using piped gas wherever possible.
• ICRA expects the Indian hospitality industry’s revenues to rise by 7-9% YoY in FY2027, supported by domestic leisure travel, demand from meetings, exhibitions, conferences and events (MICE), weddings, and business travel. ICRA anticipates pan-India premium hotel occupancy to remain at 72-74% in FY2027, largely like FY2026 levels, while ARRs for premium hotels are projected to increase to Rs. 8,600-8,800 in FY2027 from Rs. 8,200-8,500 in FY2026. A prolonged delay in resolution of the West Asia conflict, however, would exert pressure on these estimates.

Exhibit 1: Trend in current sentiment index (CSI) and future expectation index (FSI)

Source: Urban consumer sentiments RBI; ICRA Research; Note - CSI and FEI are compiled on the basis of net responses on the economic situation, income, spending, employment and the price level for the current period (compared with one year ago) and a year ahead, respectively. CSI and FEI = 100 + Average of Net Responses of the above parameters.