Espire Hospitality Ltd Management Discussions

MANAGEMENT DISCUSSION & ANALYSIS

EHL is steadfast in its vision to establish a strong footprint in the hospitality industry by curating world-class hotels and resorts. With a commitment to redefining luxury and delivering personalized, guest-centric experiences, the Company aspires to set new benchmarks in ultra-luxury hospitality and create destinations that inspire unforgettable memories.

This Management Discussion and Analysis (MDA) Report presents an overview of the operational and financial performance of the Company. It also discusses the opportunities, Espire Hospitalitys strategy and important initiatives taken by it during the year.

Industry structure & developments

1. Global Economics & Growth

Global Economic Environment

Moderating but resilient global growth:

The global economy demonstrated resilience during FY 2025-26 despite an increasingly complex operating environment characterised by geopolitical tensions, trade and tariff uncertainties, elevated sovereign and

monetary-policy normalisation, commodity-price volatility and disruptions to global supply chains.

According to the International Monetary Fund (IMF), global real GDP growth is projected at 3.0% in calendar year 2026 and 3.4% in 2027, indicating a gradual strengthening in the global growth trajectory.

Growth remains uneven across regions:

Advanced economies continue to experience relatively moderate growth, reflecting mature economic structures, demographic pressures and subdued productivity growth. Emerging markets and developing economies remain important contributors to global expansion, although their performance continues to be differentiated by domestic demand conditions, fiscal space, commodity exposure and external financing requirements.

India remains a key global growth engine:

India continues to stand out among major economies, supported by strong domestic consumption, public infrastructure expenditure, improving private-sector investment, digitalisation, formalisation of economic activity and increasing integration with global supply chains. The IMFs July 2026 projections place Indias calendar-year real GDP growth at 7.0% in 2026 and 6.4% in 2027.

Inflationary pressures have moderated, but risks remain:

Global inflation has broadly moderated from the peaks witnessed in the post-pandemic period. However, inflation remains vulnerable to energy-price shocks, geopolitical developments, supply-chain disruptions, commodity-price movements and weather-related events. Consequently, the global interest-rate environment continues to be data-dependent, with implications for capital flows, currencies and investment decisions.

Interest rates and financial conditions:

The gradual easing of monetary conditions in several major economies has the potential to support investment and consumption. However, the pace and extent of monetary easing remain uncertain. Higher-for-longer interest rates in some economies could continue to constrain discretionary spending and corporate investment, while volatility in global bond and currency markets may affect emerging-market capital flows.

Geopolitical and trade-related uncertainties:

The global economic outlook remains exposed to geopolitical conflicts, regional instability, changing trade policies, tariff measures, sanctions and supply-chain realignments. These factors can influence international travel patterns, aviation capacity, fuel prices, foreign exchange rates and business confidence.

Reconfiguration of global supply chains:

Global businesses continue to diversify manufacturing and sourcing footprints to improve supply-chain resilience. This structural trend creates opportunities for countries such as India to attract manufacturing, services, technology and investment activity. For the hospitality sector, such investment can translate into sustained corporate travel, project-related travel, long-stay demand, meetings and events.

Travel and tourism outperforming the wider economy:

Travel & Tourism remained an important contributor to global economic activity. According to the World Travel

& Tourism Council (WTTC), global Travel & Tourism contributed approximately US$11.6 trillion to global GDP in 2025, equivalent to around 9.8% of global GDP, and supported approximately 366 million jobs. The sector grew by 4.1% during 2025, outpacing overall global economic growth.

International tourism has moved from recovery to expansion:

The global tourism industry has broadly transitioned from post-pandemic recovery into a more normalised growth phase. The sector is increasingly being influenced by changing traveller preferences, greater propensity to travel, experience-led consumption, premiumisation, wellness, bleisure and digital booking behaviour.

Implications for hospitality:

The global macroeconomic environment presents both opportunities and challenges for hotel companies. Resilient travel demand, increasing disposable incomes in emerging markets and growth in business and leisure travel support the industrys long-term prospects. Conversely, geopolitical events, aviation disruptions, energy prices, inflation and foreign-exchange volatility can result in short-term fluctuations in occupancy, room rates and international demand.

2. India Economics & Growth

Indian Economic Environment

Strong economic growth:

India remained one of the fastest-growing major economies during FY 2025-26. Following the adoption of the revised national accounts series, the Ministry of Statistics and Programme Implementation (MoSPI) has estimated Indias real GDP growth at 7.8% for FY 2025-26, compared with 7.2% in FY 2024-25 under the updated series. Nominal GDP growth for FY 2025-26 has been estimated at 8.6%.

Broad-based domestic economic activity:

Economic activity remained supported by private consumption, investment, infrastructure spending and the continued expansion of services. The services sector remains a significant contributor to Indias growth, supported by financial services, information technology, professional services, trade, transport, communication and other consumer-facing activities.

Consumption remains a structural strength:

Indias large and increasingly aspirational consumer base continues to provide a strong foundation for economic growth. Rising household incomes, urbanisation, increasing financial inclusion, greater digital adoption and a growing propensity to spend on travel and experiences are supportive of domestic tourism and hospitality demand.

Investment and infrastructure development:

Continued public investment in roads, airports, railways, urban infrastructure and digital infrastructure is improving connectivity between major cities and emerging destinations. This is progressively reducing travel time and increasing the commercial viability of Tier 2, Tier 3 and leisure destinations.

Improving air connectivity:

Expansion of airport infrastructure and increasing domestic aviation connectivity have supported the growth of both business and leisure travel. Improved connectivity is particularly important for the hospitality industry because it expands the addressable market for hotels beyond traditional metropolitan centres.

Inflation and monetary conditions:

Inflation conditions were relatively benign for a significant part of FY 2025-26, supporting household purchasing power. However, the outlook remains sensitive to food prices, crude oil prices, weather conditions and global commodity markets. The Reserve Bank of India (RBI), in its August 2026 assessment, projected real GDP growth for FY 2026-27 at 6.7%, with CPI inflation projected at 5.0%.

Resilience despite external uncertainties:

Indias relatively large domestic demand base provides a degree of insulation against external shocks. Nevertheless, changes in global trade policies, commodity prices, geopolitical tensions, global financial conditions and exchange rates can influence business confidence and discretionary spending.

Manufacturing and investment opportunities:

The continued focus on domestic manufacturing, infrastructure development, digitalisation and supply-chain diversification presents opportunities for increased corporate travel and demand for business hotels. New industrial corridors, data centres, technology hubs, manufacturing facilities and infrastructure projects can create incremental accommodation demand in emerging business markets.

Tourism as a contributor to economic activity:

Tourism is an important contributor to employment, foreign exchange earnings, regional development and services-sector activity. The Ministry of Tourism estimates that tourism contributes approximately 5.22% to Indias GDP, underlining its importance to the broader economy.

Strong domestic tourism base:

Domestic tourism remains the principal structural driver for Indian hospitality. Ministry of Tourism data indicates approximately 4.29 billion domestic tourist visits in 2025, representing substantial year-on-year growth. This large domestic market provides Indian hotels with a strong demand cushion against volatility in international travel.

Opportunity to increase inbound tourism:

India continues to have significant headroom in international tourism. Ministry of Tourism data records approximately 9.15 million foreign tourist arrivals in 2025, while total international tourist arrivals, including NRIs, were approximately 20.22 million.

The relatively modest share of international tourism compared with Indias population, economic scale and tourism assets represents a significant long-term opportunity.

Implications for hospitality:

Indias strong economic fundamentals, expanding middle class, infrastructure investments, improving connectivity and increasing domestic travel propensity provide a favourable structural environment for the hospitality industry. The principal opportunities lie in increasing hotel penetration, expanding into emerging markets, attracting international travellers and capturing premium demand.

3. Hospitality Sector Global Scenario & Performance

Global Hospitality Environment

Transition from recovery to structural growth:

The global hospitality industry entered FY 2025-26 with the pandemic-related recovery largely behind it. International travel volumes have moved beyond pre-pandemic benchmarks in aggregate, although recovery remains uneven by geography and traveller segment. The next phase of growth is increasingly being driven by underlying travel propensity, disposable income, business travel, leisure demand and experiential consumption rather than merely recovery from depressed levels.

Travel & Tourism is outperforming global economic growth:

WTTC estimates that global Travel & Tourism grew by 4.1% in 2025 compared with global economic growth of 2.8%. Domestic visitor spending increased 3.7%, while international visitor spending increased 3.2%.

This relative outperformance demonstrates the sectors increasing importance as a global economic growth engine.

International tourism demand remains resilient:

The global tourism ecosystem has demonstrated considerable resilience despite geopolitical uncertainty, inflation and higher travel costs. Consumers continue to prioritise travel and experiences, although they are becoming more selective with respect to destination, accommodation category, value proposition and travel timing.

Premiumisation and experience-led travel:

Travellers are increasingly allocating a higher proportion of discretionary spending towards distinctive experiences, premium accommodation, wellness, culinary offerings, cultural experiences and personalised services. This trend supports the premium and luxury hotel segments, provided operators deliver differentiated experiences and maintain service standards.

Bleisure and flexible travel:

The boundaries between business and leisure travel continue to evolve. Business travellers are increasingly extending corporate trips for leisure, while flexible work arrangements have created opportunities for longer stays and mid-week leisure demand.

Meetings, Incentives, Conferences and Exhibitions (MICE):

MICE travel continues to represent an important demand segment for hotels, particularly in gateway cities and business destinations. Corporate events, exhibitions, conferences, weddings and social celebrations provide hotels with opportunities to diversify revenue beyond rooms.

Aviation remains a critical industry enabler:

Hotel performance remains closely linked to airline capacity, airport connectivity and travel costs. Aviation disruptions, fuel-price increases, airfares and airport capacity constraints can materially influence destination-level demand.

Technology and digitalisation:

Technology is reshaping hotel distribution, revenue management, customer engagement and operational processes. Artificial intelligence, data analytics, digital check-in, personalisation, automated service tools and integrated customer relationship platforms are becoming increasingly relevant to improving guest experience and operating efficiency.

Sustainability is moving from differentiation to expectation:

Environmental sustainability, energy efficiency, water conservation, waste management, responsible sourcing and community engagement are becoming increasingly important considerations for guests, investors, lenders and corporate customers.

Capital investment remains strong:

Global Travel & Tourism investment exceeded US$1 trillion in 2025, growing 8.5% year-on-year, according to WTTC. The scale of investment reflects continued investor confidence in the sectors long-term growth prospects.

Global hotel performance remains market-specific:

While the overall industry outlook is positive, hotel performance differs materially by geography, destination, segment and supply pipeline. Markets with constrained supply and strong demand continue to demonstrate pricing power, whereas markets with significant new supply may experience greater pressure on occupancy and rate growth.

Outlook:

The global hospitality sector is expected to remain on a growth trajectory, supported by rising travel demand, increased international mobility, expanding middle classes in emerging markets and continued investment in tourism infrastructure. However, the operating environment is likely to remain volatile, requiring disciplined revenue management, cost optimisation, technology adoption and prudent capital allocation.

4. Hospitality Sector India Scenario & Performance

Sector Performance

Indian hospitality remained on a strong footing:

The Indian hotel industry continued to demonstrate strong fundamentals during FY 2025-26, supported by robust domestic travel, corporate activity, weddings, MICE, leisure travel and improving connectivity.

Healthy occupancy levels:

HVS Anarock estimates that the Indian hotel sector closed CY2025 with nationwide occupancy in the range of 63%-65%. Average Room Rate (ARR) increased to approximately 8,500- 8,700, resulting in RevPAR of approximately 5,400- 5,600.

Pricing power remained a key feature:

A combination of healthy demand, disciplined supply growth and increasing willingness of customers to pay for quality accommodation supported room-rate growth. Hotels demonstrated the ability to sustain pricing despite periodic geopolitical, weather and aviation disruptions.

Strong performance across demand segments:

The Indian market is benefiting from a diversified demand base comprising:

Corporate and commercial travel;

Domestic leisure travel;

Weddings and social events;

MICE;

Government and institutional travel;

Medical and wellness tourism;

Religious and spiritual tourism;

International inbound tourism; and

Long-stay and extended business travel.

Domestic demand remains the principal anchor:

Indias very large domestic travel market provides resilience to the hotel sector. The continued increase in domestic tourist visits, combined with rising disposable incomes and improved road, rail and air connectivity, is expanding the addressable market for hotels.

Tier 2, Tier 3 and Tier 4 markets gaining importance:

Hotel development is increasingly moving beyond the established metropolitan markets. HVS Anarock reports that approximately 64,118 branded hotel keys across 586 properties were signed during CY2025, while approximately 14,199 rooms across 176 properties opened. Importantly, a growing proportion of development is being directed towards Tier 2, Tier 3 and Tier 4 markets.

Growth of branded hotel supply:

The expansion of branded hotel chains is increasing consumer awareness and creating greater demand for professionally managed accommodation. It is also supporting the formalisation and institutionalisation of the Indian hospitality market.

Emerging destinations:

Improving infrastructure and connectivity are creating opportunities in emerging business centres, religious destinations, leisure markets, wildlife destinations, pilgrimage circuits, industrial hubs and regional capitals.

Business travel remains important:

Indias expanding services economy, manufacturing investments, infrastructure projects and corporate activity continue to support business travel. Major metropolitan centres and established business hubs remain structurally attractive, while new commercial centres are creating additional demand pools.

Weddings and social celebrations:

Weddings have become an important source of demand and revenue for Indian hotels. Higher spending on destination weddings, premium venues and curated experiences provides opportunities for hotels to generate room, banquet, food & beverage and ancillary revenues.

MICE demand:

The increasing number of corporate conferences, exhibitions, incentive programmes and large-scale events is supporting demand, particularly in hotels with adequate meeting, banquet and event infrastructure.

Luxury and premiumisation:

Indias expanding affluent and upper-middle-income consumer segments are increasing demand for premium hotels, resorts and experiential travel. Premiumisation also provides opportunities to improve ARR and ancillary revenues.

Wellness, medical and spiritual tourism:

Wellness tourism, medical travel and spiritual tourism are emerging as attractive demand segments. Indias established healthcare ecosystem, Ayurveda and wellness traditions, cultural heritage and religious destinations provide significant opportunities for hospitality companies.

Inbound tourism provides substantial headroom:

Despite Indias large tourism potential, international visitor volumes remain relatively modest compared with the countrys size and tourism assets. This provides a significant medium- to long-term opportunity for hotel operators to increase international demand. WTTC estimates that international visitor spending currently represents only around 14% of Indias total Travel & Tourism spending, highlighting the opportunity to capture a larger share of global travel expenditure.

Outbound tourism also creates competitive pressure:

Indian outbound travel continues to expand, with approximately 32.83 million Indian national departures recorded in 2025.

This represents an opportunity for domestic destinations and hotels to improve product quality and value propositions to retain a greater share of Espire Hospitality Limited Annual Report 2025-26 Indian discretionary travel expenditure within the country. 111

Operating environment in FY 2025-26:

The sector also experienced periodic volatility arising from geopolitical developments, aviation disruptions and weather-related factors. Nevertheless, underlying domestic demand remained resilient and enabled hotels to maintain healthy occupancy and pricing. HVS Anarocks subsequent 2026 monitoring continued to report healthy year-on-year performance in several markets despite periods of geopolitical and seasonal disruption.

Key industry risks:

The principal risks for the Indian hospitality industry include:

Geopolitical disruptions and their impact on international travel;

Airline capacity and airfares;

Crude oil and energy-price volatility;

Excessive supply additions in individual markets;

Economic slowdown;

Weather and climate-related events;

Labour availability and wage inflation;

Utility and food-cost inflation;

Changes in taxation and regulations; and

Cybersecurity, technology and data-privacy risks.

Overall assessment:

The Indian hospitality sector enters the next phase of its growth cycle from a position of relative strength. Strong domestic demand, favourable demographic trends, improving infrastructure, limited penetration of branded accommodation in many markets and increasing investor interest provide a favourable medium- to long-term structural outlook.

5. Hospitality Growth Outlook & Prospects FY 2026-27 Onwards

Industry Outlook

Positive medium- to long-term outlook:

The Company believes that the Indian hospitality industry is entering a structurally favourable period, supported by sustained economic growth, rising disposable incomes, increasing domestic travel, infrastructure development, improving air connectivity, growing corporate activity and rising international interest in India.

Economic growth will support hotel demand:

Indias real GDP growth is expected to remain robust. The RBIs August 2026 projection places FY 2026-27 real GDP growth at 6.7%, providing a supportive macroeconomic backdrop for business and leisure travel.

Travel & Tourism expected to outpace the broader economy:

WTTC expects Indias Travel & Tourism sector to grow faster than the wider economy in 2026. Its latest research estimates that Indias Travel & Tourism sector contributed approximately US$263.6 billion to the economy in 2025, supported 46.2 million jobs and grew 7.3%; it forecasts sector growth of approximately 8.5% in 2026.

Domestic travel will remain the principal growth engine:

The depth and diversity of Indias domestic travel market provide a structural advantage. Rising incomes, shorter travel times, greater air and road connectivity, increasing weekend travel and greater willingness to spend on experiences are expected to support sustained demand.

International tourism represents a significant opportunity:

India has considerable potential to increase its share of international tourism. Improved destination marketing, visa facilitation, airport connectivity, global air capacity and development of internationally competitive tourism products could materially increase inbound demand over the medium term.

Tier 2-4 cities are likely to be major growth markets:

The next phase of hotel supply growth is expected to be increasingly distributed across Tier 2, Tier

3 and Tier 4 markets. These locations benefit from lower development costs, expanding economic activity, increasing domestic travel and improving connectivity. HVS Anarocks data indicates that the hotel development pipeline is already broadening beyond the major metropolitan centres.

Infrastructure will expand the hotel market:

Continued investment in airports, highways, railways, urban infrastructure and tourism infrastructure is expected to unlock new destinations and improve accessibility. This should benefit both business and leisure hotels.

Corporate travel and MICE:

Continued economic formalisation, manufacturing investment, infrastructure development and expansion of Indias services sector should support corporate travel. MICE is expected to remain an important contributor to occupancy and non-room revenues.

Weddings and social events:

The scale and increasing sophistication of Indias wedding market provide significant opportunities for hotels with suitable banquet, event and accommodation infrastructure. Destination weddings are likely to remain an important growth segment.

Leisure, experiential and wellness tourism:

Travellers are increasingly seeking experiences rather than accommodation alone. Hotels offering differentiated culinary, wellness, nature, cultural, adventure and experiential products are expected to benefit from this trend.

Premiumisation should support ARR:

As consumers increasingly value quality, convenience, service and differentiated experiences, premium and luxury accommodation is expected to continue gaining traction. This creates opportunities for disciplined rate growth, provided additional supply remains aligned with demand.

Technology and artificial intelligence:

Technology will increasingly influence hotel operations, distribution and customer engagement. Artificial intelligence and data analytics can support:

Dynamic pricing and revenue management;

Demand forecasting;

Personalised marketing;

Direct booking conversion;

Guest communications;

Workforce optimisation;

Energy management; and

Operational efficiency.

Asset-light expansion:

Management contracts, franchising and other asset-light models are expected to remain important growth avenues for branded hotel companies. These models can facilitate faster geographic expansion while reducing capital intensity and enabling companies to leverage their brands, operating expertise and distribution platforms.

Capital discipline will remain important:

While the sectors growth prospects are attractive, hotel development is inherently cyclical and market-specific. Companies are therefore expected to focus increasingly on location quality, demand visibility, return on capital, brand positioning and disciplined supply addition.

Sustainability and responsible hospitality:

Sustainability is expected to become increasingly integrated into hotel strategy. Energy efficiency, renewable energy, water conservation, waste reduction, responsible sourcing and sustainable construction can help reduce operating costs while meeting evolving stakeholder expectations.

Human capital and service quality:

Skilled manpower remains critical to the hospitality industry. As the sector expands, investment in training, employee engagement, leadership development and technology-enabled productivity will be important to maintain consistent service standards.

Potential for sustained pricing power:

The industrys recent performance demonstrates that demand growth combined with disciplined supply can support healthy occupancy and ARR. If supply additions remain calibrated to demand, the sector could sustain a favourable pricing environment over the medium term.

Near-term volatility should not obscure structural opportunity:

The Company expects the industry to experience periodic volatility arising from geopolitical events, aviation disruptions, weather, commodity prices and global economic conditions. However, such short-term fluctuations are expected to coexist with strong structural demand drivers.

Long-term opportunity:

WTTC projects Indias Travel & Tourism sector to almost double in economic contribution over the decade to 2036, reaching approximately US$527 billion, with India potentially rising from the tenth-largest Travel & Tourism economy globally to fourth place.

This provides a strong indication of the scale of the long-term opportunity available to Indian hospitality companies.

Strategic implications for the Company:

Against this backdrop, the Companys strategic priorities are expected to centre on:

Strengthening its presence in high-growth markets;

Optimising the performance of existing properties;

Driving occupancy and ARR through sophisticated revenue management;

Expanding through a calibrated mix of owned, leased, managed and franchised properties, as applicable;

Entering emerging Tier 2 and Tier 3 markets selectively;

Increasing share of direct and digital distribution;

Building ancillary revenue streams through food & beverage, banqueting, MICE, wellness and other experiences;

Maintaining high standards of guest service and brand experience;

Enhancing operating efficiencies and productivity;

Investing in technology and data-led decision-making;

Embedding sustainability into hotel operations and development; and

Maintaining financial and capital-allocation discipline.

Overall Outlook

The Company remains constructive on the medium to long-term prospects of the Indian hospitality sector. Indias strong economic fundamentals, favourable demographics, increasing travel propensity, infrastructure expansion, growing corporate activity, rising domestic consumption and significant headroom in international tourism provide a strong foundation for sustained industry growth.

The Company expects FY 2026-27 and the subsequent years to present opportunities for healthy occupancy, measured room-rate growth, improved RevPAR, expansion into emerging markets and growth in ancillary revenues, subject to market-specific supply additions and the broader macroeconomic environment.

At the same time, the Company remains cognizant of risks arising from geopolitical developments, global economic volatility, aviation capacity, energy prices, inflation, weather events, regulatory changes and competitive supply. Accordingly, the Company intends to pursue growth with an emphasis on operational excellence, customer centricity, prudent capital allocation, asset productivity, technology adoption, sustainability and balance-sheet discipline.

Overall, the Indian hospitality sector is well positioned to benefit from Indias transition towards a larger, more consumption- and services-led economy and from the countrys increasing integration with global travel and business ecosystems.