The hotel industry demand has recovered at a sharper pace post Covid 2.0 compared to last year’s lockdown, aided by the easing of restrictions in Q2 FY2022.
Partial lockdown as well as travel restrictions in many states in April and May 2021 post the onset of Covid 2.0 resulted in the ICRA sample of companies reporting a 56% decline in revenues on a QoQ basis, in line with the ratings agency’s estimates. However, the revenues are expected to improve by 85-90% sequentially in Q2 FY2022.
Occupancy has picked up, with the August-21 Pan-India premium hotel occupancy at 44-46%. For 5M FY2022, the same is estimated to be ~32-34% (up from ~13-15% in 5M FY2021) vis-à-vis ~46-48% in Q4 FY2021. The Pan-India ARRs are estimated at ~Rs. 3,850-3,950 for 5M FY2022 and still remain at a 25-30% discount to pre-Covid levels, although some high-end hotels and leisure destinations have even seen ARRs return to pre-Covid levels in Aug-21/Sep-21. Travel during the festive season travel will act as a key demand booster for the industry in Q3 FY2022, shared a report y ICRA.
Most markets reported over 50% occupancy in Jul-21 and Aug-21, the key markets - Jaipur, Goa, Delhi, Mumbai and Hyderabad displayed healthy occupancies whereas Bangalore and Pune lagged behind.
The demand recovery pattern has different from other crises, with properties with affiliated strong brands and in the luxury segment standing to benefit, as trust and safety are paramount. Drive-to leisure, staycations, social MICE/weddings and special purpose groups are expected to drive revenues for hotels for the next one year at least.
ICRA continues to have a negative outlook on the Indian hotel industry, as the sustenance of the demand pickup in the recent months remains to be seen. A potential third wave and its impact on travel and hotel occupancies cannot be ruled out. Further, the RevPAR is still significantly lower than pre-Covid levels. About 63% of ICRA’s ratings are also on negative outlook currently.