Hotels to see strong H2 as new airport, events boost demand: Motilal Oswal

Motilal Oswal on hotels sector: India’s hotel industry is set for a strong second half of FY26, with demand expected to accelerate on the back of a packed events calendar, robust Meetings, Incentives, Conferences, and Exhibitions (MICE) activity and a major shift in the Mumbai hospitality landscape as the Navi Mumbai International Airport (NMIA) opens in December, Motilal Oswal said in a recent note.

 

After a healthy H1FY26, which saw around 15 per cent Y-o-Y growth in both revenue and Ebitda for listed hotel companies, the brokerage expects Q3FY26 industry average room rate (ARR) and revenue per available room (RevPAR) to rise 9-11 per cent and 12-15 per cent Y-o-Y, respectively. Despite a cluster of festivals in October that softened occupancies for listed players, channel checks showed steady leisure demand, and November delivered mid-to-high-teen RevPAR growth thanks to a busy wedding season. December visibility remains firm, supported by back-to-back MICE events.

 

 

A key driver in the coming quarters will be the commissioning of NMIA on December 25, 2025. The airport, jointly promoted by the Adani Group and CIDCO, will initially operate with 20 million annual passenger capacity and 23 daily departures, before scaling to full 24-hour operations from February 2026. With only ~1,539 branded hotel keys currently available in Navi Mumbai and several commercial hubs, including the upcoming Navi Mumbai Aerocity, clustered around the new airport, Motilal expects a sharp supply-demand imbalance to benefit established players with early presence. These include Chalet Hotels, IHCL, Lemon Tree Hotels and SAMHI, all of which have either existing hotels or projects underway in the region.  ALSO READ | YES Sec picks top hotel stocks as it sees higher room rates in metro cities 

The brokerage flagged that multiple operators are already ramping up capacity. SAMHI is setting up its largest hotel in Navi Mumbai with 700 planned keys, while Lemon Tree, Chalet and Park Hotels have outlined new developments. Radisson is also entering the market with a 350-key Radisson Collection property slated to open in early CY30.

 

Mumbai’s broader hospitality market is also primed for an upswing. According to HVS, while heavy rains and a high base kept Q2FY26 muted, H2FY26 demand should strengthen considerably with more auspicious wedding dates, an active concert lineup (Linkin Park, John Mayer, DJ Snake), and the T20 Cricket World Cup matches hosted in the city. The Jio World Convention Centre continues to act as a major MICE magnet, lifting occupancy and ARR for hotels in the BKC-Kurla belt, where supply remains limited. 

The structural outlook remains favourable, analysts said. Mumbai contributes nearly 15 per cent to India’s hotel room revenue and disproportionately dominates the luxury segment. Over FY24-27, luxury-room demand in the city is projected to grow at an 11.5 per cent CAGR, outpacing the 5.4 per cent supply CAGR, indicating sustained pricing power for operators. Major expansions, such as Leela’s entry into BKC and IHCL’s redevelopment of Taj Bandstand, aim to tap into this momentum.  ALSO READ | Top wealth creators of 2020-25: biggest, fastest and consistent stocks here 

Meanwhile, the industry has weathered recent airline disruptions caused by IndiGo’s Flight Duty Time Limit (FDTL) compliance issues. Though over 4,200 flights were cancelled in Q3FY26, Motilal noted only minimal impact on hotels, with many travellers extending stays and airport-adjacent properties seeing incremental demand.

 

Motilal Oswal said India’s hotel sector is set to gain from strong domestic travel, increased corporate mobility, a packed MICE pipeline and improving infrastructure. It expects hotel companies to maintain healthy ARR growth and resilient occupancies through FY26-27. Thus, the brokerage reiterated its ‘Buy’ ratings on Indian Hotels (Target: ₹880) and Lemon Tree Hotels (Target: ₹200).

 

Disclaimer: The view/outlook has been suggested by Moitlal Oswal. Views expressed are their own