Hotel Sector Rises as Geopolitical Concerns Ease, Driving Resilience in Key Markets

Hotel Sector Rises as Geopolitical Concerns Ease, Driving Resilience in Key Markets​

India's hotel market shows strong signs of recovery and resilience as Average Daily Rates (ADRs) improve across major metropolitan hubs in early Q2FY27. Nomura reports that the impact of recent geopolitical tensions is receding from pricing dynamics, enabling domestic and leisure demand to drive sustained growth for key industry players.

The brokerage firm tracked trends across approximately 250 hotels in Delhi, Goa, Hyderabad, Mumbai, and Bengaluru. The stability and improvement observed in these diverse markets indicate a sector stabilizing after periods of sharp correction recorded earlier this year.

ADR Trends Across Major Indian Cities​

ADRs showed marked upward momentum in key commercial hubs during July. Delhi’s average rate recovered sharply to between Rs 11,000 and Rs 11,500 per day, up from roughly Rs 9,800 in late June. This recovery is attributed partly to easing volatility related to the Middle East conflict alongside sustained event-led demand.

Bengaluru witnessed a significant rise, with ADRs reaching between Rs 17,000 and Rs 18,000 per day, up from Rs 15,700 in late June. This performance is being buoyed by corporate travel driven by IT firms and GCC clientele. Hyderabad also saw a sharp improvement, with ADRs climbing to between Rs 15,000 and Rs 15,500 from Rs 12,400 in the preceding month.

Mumbai's market appeared to have reached its bottom point in June, stabilizing at approximately Rs 13,700 per night by mid-July. In contrast, Goa remains subdued, with ADRs hovering around Rs 8,000 to Rs 8,500 per day, falling short of the peak season range of Rs 12,000 to Rs 16,000 recorded between December and March.

Expert Outlook for Hospitality Giants​

Nomura maintains a Buy rating on IHCL, ITC Hotels, and Leela, projecting robust ADR growth rates over the next quarters. For Q1FY27, the brokerage anticipates IHCL and Leela to achieve 7-10% ADR growth, supported by resilient domestic and leisure demand.

Looking ahead to Q2FY27, Nomura is bullish on a higher growth trajectory for these stocks. The company estimates IHCL will record around 9% ADR growth. Furthermore, Leela is expected to see between 10 and 11% growth, with ITC Hotels projected for approximately 8% growth in the same quarter.

Risk Assessment and Market Resilience​

The brokerage emphasized that while hotel prices are improving across several key segments, downside risks persist throughout Q2FY27. These risks are intrinsically linked to the level of escalation regarding the war in the Middle East.

However, Nomura maintains a positive outlook by noting the hotels' low base recorded during 2QFY26. This lower starting point allows for greater potential upside movement as market conditions stabilize and consumer confidence returns to the sector.