Rains drag Q2 growth for hotels; festive, MICE demand to drive H2

An extended monsoon slowed Q2 occupancy for hospitality players, but brokerages expect a strong second half led by MICE, festive, and wedding demand

An extended spell of rains impacted occupancy in the hospitality sector even as average room rates (ARR) remained resilient in the September quarter (Q2FY26), according to brokerages tracking the sector. They expect a strong second half of FY26, driven by increased meetings, incentives, conferences and exhibitions (MICE) activity, festive season demand, and steady corporate travel.

 

“We believe heavy monsoons have impacted domestic leisure travel demand in Q2, coupled with a seasonally lean period for foreign tourist arrivals (FTA). This is expected to be partially offset by sustained momentum in business and metro destinations, led by robust MICE demand and spikes during long weekends,” said analysts at Yes Securities, which tracks hospitality giants such as Indian Hotels Company (IHCL), Lemon Tree Hotels, and Oberoi parent EIH, among others.

 

Occupancy dips, but ADRs hold steady

 

At an industry level, July and August saw a marginal dip in occupancy of around 150–250 basis points. However, average daily rate (ADR) growth has moderately sustained at 5 per cent year-on-year.

 

“We expect branded players to post marginally higher ADR growth, supported by a higher mix of business hotels where the impact has been limited. Gradual recovery in ADRs and robust corporate and MICE activity are positive highlights for Q2 and set the stage for a strong H2,” said Yes Securities.

 

Base effect, monsoons weigh on quarterly performance

 

Analysts at JM Financial, which tracks asset owners such as Chalet and Juniper besides hotel brands, said growth is set to moderate in the September quarter due to the base effect and monsoon impact.

 

“Industry performance in Q2FY26 is likely to moderate, impacted by the base effect due to a higher number of auspicious days (marriage dates) in the base quarter, extended or excess monsoon rains affecting travel and MICE demand, and seasonal softening,” JM Financial said in a note dated October 8.

 

Brokerages remain bullish on H2 outlook

 

“We believe the hospitality industry will continue its strong performance in the near term, driven by steady corporate travel, healthy MICE activity, live events, and a strong wedding segment. In the medium term, growth is expected to be supported by sustained demand across the industry, a favourable demand-supply gap, and a strong pipeline of upcoming hotel projects,” noted analysts at Antique Stock Broking.

 

Tier-1, metro hotels to outperform leisure-heavy portfolios

 

Yes Securities added that leisure travel demand was especially impacted during the quarter ended June and that companies with a higher presence in Tier-1 and metro destinations are expected to deliver better performance compared to those with a higher leisure mix.

 

The brokerage expects revenue growth of 16.6 per cent across its coverage companies. “Occupancy is expected to remain flattish to negative across players, with average high single-digit ARR growth, leading to high single-digit revenue per available room (RevPAR) growth for coverage companies,” it added.