AI, Premiumisation & Experiences to Drive Hospitality

After weathering years of disruption and rapid change, India’s hospitality industry is entering a phase of steady and sustainable growth. Rising domestic travel, a revival in corporate and MICE demand, and increasing interest from international travellers are driving strong performance across hotels, resorts and branded accommodation. With new supply carefully calibrated and average room rates holding firm, the sector is moving beyond recovery into a more mature growth cycle. TARUN Seth, General Manager - Grand Hyatt Gurgaon, believes this phase will be shaped by technology, premiumisation and evolving guest expectations.

I f there was one thing very striking in the hospitality industry during 2025, it was the resilience and pace of domestic demand across tier II and III cities. The hotel developments were unprecedented in these areas. What was once considered a medium-term growth story accelerated rapidly, reaffirming India’s depth as a travel market. As such, the outlook for 2026 is broadly optimistic. Demand fundamentals remain strong, but the coming year is likely to be defined by smart growth rather than rapid expansion.

“Guests are becoming more discerning, and success will depend on relevance, personalisation and operational agility,” opines Tarun. The industry expects sharper competition, higher guest expectations and increased scrutiny on value delivery. The focus will be on future-proofing operations, investing in talent and leveraging technology to elevate both efficiency and experience. These factors will be driven by the rise in aspiration levels among travellers.

A Year of Pressure

Industry experts regard 2025 as a year of consolidation, marked by a military conflict between India and Pakistan, tariff-related pressures, mixed corporate performance, and an airline crisis towards the end of the year. The hospitality sector is highly sensitive to domestic or international disturbances and is often among the first to feel the impact. Recovery can take time because sentiment frequently outweighs data. “The year 2025 proved to be a mixed bag. While some segments and room revenues improved, events and corporate groups remained stagnant,” Tarun reflects. The challenge the industry had to face was to navigate persistent uncertainties.

Meanwhile, in the case of Grand Hyatt Gurgaon, 2025 delivered a strong, balanced performance, fuelled by rooms, and food and beverage outlets, with a consistent focus on guest experience. “We experienced healthy growth across various sectors, further solidifying our position as a destination,” Tarun says. However, meaningful progress across the country will require stronger alignment between industry bodies and policymakers. Granting infrastructure status would be transformative, particularly in improving access to long-term financing and accelerating development in emerging destinations.

Potential Ahead

When it comes to the hospitality industry, India’s opportunity lies in positioning itself as a year-round, experience-led destination; not just for stays but for culinary journeys, wellness, celebrations and curated business experiences. This potential includes travel to smaller, offbeat towns and cities, destination weddings and pilgrimage tourism. Leading hotels have already invested heavily in such locations, and results have been encouraging, particularly where properties go the extra mile to offer local experiences and authentic food and beverage choices.

With travel patterns evolving and guest expectations shifting, growth in 2026 will be driven by experiential travel, premium domestic tourism, destination weddings, wellness-led stays and thoughtfully curated MICE programmes. “Guests are no longer seeking standardised offerings, they are looking for authenticity, storytelling and emotional connection,” Tarun observes.

Another subtle yet impactful shift which is likely to yield positive results in the coming year is a move towards sustainable practices and responsible hospitality. Numerous hotels have made concrete investments in energy efficiency and waste recycling. These may go unnoticed in headlines but are transforming the industry’s approach to operations. “Many organisations are using sustainability data to select hotels as a conscious measure,” Tarun points out. Hotels that blend local culture, global standards and personalised service will lead the next phase of growth.

Predictions for 2026

India’s hospitality sector is forecast to grow by about 6–8 percent in revenue in FY2026, indicating a moderation to stable growth after the strong post-pandemic expansion. Industry reports expect premium hotel occupancy in India to hold at around 72–74 percent, with average room rates rising modestly

The Stumbling Blocks

Even as opportunities unfold, talent availability and rising labour costs remain the most pressing concerns, followed by energy costs and regulatory complexity. Addressing these issues requires long-term structural solutions rather than short-term fixes. “The recognition of hospitality as a key economic and employment driver is essential to unlock the sector’s full potential,” Tarun states.

Therefore, rising operational costs and talent shortages will shape the strategies of the hospitality industry for the year ahead. Of these, energy, payroll and supply chain costs are the most vulnerable lines. “Our response would have to be rooted in efficiency, technology enablement and peoplefirst leadership,” Tarun says.

A Focused Approach

Collaborations are becoming a major growth driver across the sector. “Collaborations will be central to growth in 2026, whether with culinary experts, wellness brands, cultural institutions or technology partners. These partnerships allow hotels to stay culturally relevant while delivering differentiated guest experiences,” Tarun explains.

Hotels are also seeing artificial intelligence (AI) as an enabler rather than a replacement for human hospitality. From predictive maintenance and demand forecasting to personalised guest engagement, technology will play a meaningful role in enhancing efficiency and consistency.

And while this happens, the heart of hospitality will continue to remain human-led. “In our case, renovation plans will continue to focus on timeless design, sustainability and intuitive functionality, ensuring our hotels remain contemporary yet enduring.

Meanwhile, when it comes to talent retention, which is always an area of concern in the industry, hotels are likely to focus on career pathways, continuous learning, internal mobility, and a culture of care. Retention today is less about compensation alone and more about purpose, growth and belonging, areas where strong brands must lead by example.