An AI summit afterglow: February's demand spike boosts hospitality sector

The India AI Impact Summit 2026 has given the Indian hotels and hospitality industry a leg-up for 2026, after a tumultuous 2025 that saw terror attacks, bad weather and an air crash dampen travel and tourism. The summit, which drew hundreds of global executives and several heads of state to the national capital, caused a shortage of rooms in the luxury hotel segment, while tariffs shot up in the adjoining regions of Noida and Gurugram too. 

The spillover wasn’t limited to the northern region. Executives ended up staying in Mumbai and Bengaluru hotels in several instances, travelling to and from Delhi for the event. 

“When people come this far, they also go to some other places, not just Delhi or just Mumbai. All these events bring in foreigners and, besides the room business, you have lots of meetings — business is done over lunches and dinners,” said Puneet Chhatwal, chairman and managing director of Indian Hotels Company Ltd, the parent of Taj group of hotels, that hosted the British Prime Minister, the German Chancellor, besides the French President and multiple foreign delegates before and after the AI Summit. The January-February period is a typically busy time for events. 

While the Hotels Association of India pegged the weighted average tariff during the summit week of February 16-20 at ₹40,000-60,000 a night, research firm HVS Anarock said the weighted average daily rates in the city rose to about ₹20,900 during the summit period, compared with around ₹12,300 for the same dates in 2025. 

“At the upper end of the market, the 90th percentile rate increased from roughly Rs 20,000 to about ₹51,000, reflecting strong compression in premium inventory. This demonstrates that large-scale global events can materially elevate ARR and RevPAR in the host market during peak dates,” HVS Anarock president and chief executive for South Asia, Mandeep Lamba told Business Standard. ARR stands for average room rate and  RevPAR is revenue per available room. 

Coming away from an ‘eventful’ February, sector watchers are hopeful of better prospects in 2026, with the sector considered to be in a sweet spot.   

“Room rates have risen for four years, occupancy is at an all-time high, foreign tourist numbers are growing and domestic travel has never been better. All in all, India’s hotel industry is in a good place. What’s more, the supply of rooms is struggling to catch up with demand even as more capacity is added,” HSBC Equities said in a report in January. 

Royal Orchid Hotels Ltd president Arjun Baljee points to an important factor in this milieu — the post-Covid Indian traveller. 

“Pre-Covid, long weekends didn’t exist; now they do. Social media connects everyone to global trends. Even tier-two and tier-three customers demand global experiences locally. Ten years ago, offering Kunafa (a West Asian dessert) with chocolate in smaller cities would seem strange. Today customers know global trends and expect them. They now travel more,

celebrate more, spend on experiences, and hospitality must adapt through Indianisation of global models,” he said. 

Financial and operational metrics 

According to HSBC Equities data, ARR — a metric indicating profitability — has risen from about ₹4,500 in FY21 to nearly ₹8,400 in FY25 (ended March 2025), an increase of 86 per cent. HVS data for December 2025 shows ARR rose by 7-9 per cent to ₹10,000-10,200 compared with the same period in the previous financial year. 

RevPAR, which indicates how well a property is doing on revenue, has also risen by 7-9 per cent to ₹6,800-7,140 for December 2025 compared with the same period in the previous financial year, HVS Anarock data from January showed. With

occupancies rising by nearly 70 per cent on-year, the data indicates that hotel chains are increasingly sweating their assets

even as they build and lease more to accommodate escalating demand. 

“We expect industry-wide Ebitda (earnings before interest, taxes, depreciation and amortization) to deliver a robust 16-21 per cent CAGR over FY25-FY28e, driven by ARR growth of 5-7 per cent a year, improvements in occupancy levels across key urban and leisure markets, the addition of high-margin managed room inventory, and a healthy contribution from other segments, such as MICE (meetings, incentives, conferences, exhibitions),” HSBC Equities said. HSBC Equities has initiated coverage with ‘Buy’ ratings on hotel developers Chalet Hotels and Samhi Hotels, brands managing Lemon Tree Hotels, ITC Hotels, Leela Hotels and Resorts, among others. 

Ratings firm Care Ratings paints an even more positive picture of the sector’s growth potential, with the travel and tourism industry set to grow at a CAGR of 7.3 per cent to reach $520-545 billion by 2035, with a materially high contribution to the country's GDP at about 7-8 per cent. 

“Going forward, revenues are still projected to expand at a healthy CAGR of around 6-7 per cent over the medium term. Demand is expected to outpace supply, benefiting industry players. We also anticipate an increasing share for the upper midscale and upscale segments over the next 2 to 4 years.  Importantly, the credit profile of the hotel players strengthened in the last three years and is expected to remain so,” analysts at

the agency said in a webinar last week. 

The differentiating factor 

MICE, including corporate events and weddings, generates 30-45 per cent of sector revenue, and in 2026 this segment is expected to become an even bigger revenue spinner, analysts across the sector said, with some even forecasting Ebitda margins to expand 140 basis points on average for several companies in the sector in the next three years,

supported by traffic improvements and operational efficiencies. 

“Government-backed summits and international events are likely to become a more consistent, high-yield demand segment for premium hotels. Over time, this segment can evolve into a stable, high-yield business stream rather than just occasional spikes,” said Mandeep Lamba, president and chief executive officer South Asia of research firm HVS Anarock. India is also aiming to host international sporting events like the 2029 World Athletics Championship, 2030 Youth Olympics and 2030 Commonwealth Games, which will require government policy and infrastructure support. 

But Chhatwal flagged that with the frequency of large-scale events rising, a bigger focus on infrastructure was required. With only 21,000 hotel rooms available in the national capital, a large gathering would put pressure on inventory and push up tariffs. 

While high tariffs are good news for the sector, they raise the question of whether price dynamism can be capitalised on for the long term. Chalet Hotels chairman and managing director Shwetank Singh said that a number of factors have prepared the industry to do so. “The infrastructure push from the government, combined with the demographic of the country, where people have started earning more, and Covid teaching us to be conscious of costs, have come together in a brilliant crescendo and that has allowed the industry to really take off,” he said. 

Singh added that foreign tourist arrivals are still below pre-Covid levels, so there's headroom to grow, more so from business travellers than leisure travellers. “When expat travel happens, they travel for a longer duration, they consume a lot of food and beverage, typically these are senior executives and they travel with large groups, and India has barely scratched the surface of expat travel. They also have very good per-diems, so they can spend and the USD appreciating actually works in our favour.”  

Care Ratings’ findings show that significant momentum is coming from large convention centres, driving corporate events, trade shows and global gatherings, which in turn has boosted weekday demands and enabled hotels to maintain pricing discipline. 

Is the industry ready? 

Lamba said that about 60,000 rooms from new hotel signings are expected in 2026, broadly similar to 2025. The ‘signing

environment’ remains healthy, supported by domestic brand expansion, asset-light growth strategies and increasing participation from regional developers. 

A tad bit more activity is expected in the leisure and emerging destinations, while hill stations, pilgrimage centres and experience driven holiday markets will continue to draw strong interest from developers. 

Sector tracking agencies also point to a clear trend towards mid-scale and economy-focused supply in signings and upcoming pipeline. 

According to data from Care Ratings and Hotelivate, India’s total branded room inventory is expected to be around 311,000 by FY30 of which the largest chunk of 35 per cent or 108,850 rooms,  will reside with the midscale-economy segment of hotels. As of FY25, this number was 75,000. 

“For private investors and financial institutions, a steady pace of signings reflects continued confidence in the sector’s medium-term prospects. Hotel performance has improved consistently since 2023, giving lenders and investors greater comfort in funding projects. While capital deployment remains cautious and selective,hospitality is increasingly being viewed as a stable income generating asset class with long-term growth potential, rather than just a cyclical play tied only to economic swings,”

Lamba said.