Will weddings, travel drive India's hotel sector to new heights in H2 FY26?

ET Intelligence Group: The domestic hotel sector is likely to report growth driven by average room rate (ARR) in the coming quarters. After a muted first half of the current fiscal year marked by extended monsoon and geopolitical jitters, the second half is likely to show a rebound given a pick-up in weddings and travel. Revenue per available room (RevPAR) growth is likely to remain in the mid-to-high single digit for the year. Top picks of analysts include Chalet Hotels, Indian Hotels, Lemon Tree Hotels and Apeejay Surrendra Park Hotels, with 18-42% upside to the current market price of these stocks.

Geographically, hotels in Bengaluru, New Delhi and Hyderabad continued to outperform peers, while those in Mumbai lagged due to relatively weaker RevPAR growth in the September 2026 quarter. However, events like concerts of Linkin Park, John Mayer, and DJ Snake, the T20 Cricket World Cup, and multiple medical and tech conferences are expected to drive hotel demand in Mumbai in the second half of FY26.

India Ratings and Research estimates room additions by large companies at about 10-12% in FY26, mainly through asset-light models such as management contracts and franchise. It expects occupancies could remaining flat to marginally higher, supported by limited new supply in central business districts and the return of renovated rooms.

Analysts remain constructive on Chalet Hotels with 18% upside to Friday’s closing price of ₹871.6 due to its concentration in high-barrier business districts and exposure to premium corporate demand. The company could benefit from a recovery in conferences and exhibitions activity and limited incremental room supply in key micro-markets. While leverage has risen due to ongoing capital expenditure, strong operating cash flows and improving occupancies over the medium term are expected.

For Lemon Tree Hotels, analysts expect an upside of 25% to the closing price of ₹159.9, supported by aggressive asset-light expansion in Tier II and III cities. It has been adding inventory largely through management contracts and licence agreements, helping it scale up.

Indian Hotels is likely to gain 20-27% from Friday’s closing price of ₹731.2, driven by strong brands, a diversified portfolio and expanding pipeline.