Hotels report 82% drop in occupancy; recovery unlikely before September

Key Highlights:

• Indian hotel sector is one of the worst hit in the Asia region
• Room rates dropped by 27% and occupancies by around 82% in April
• Industry expects mild recovery from September onwards

Indian hospitality sector is one of the worst hit in the current coronavirus outbreak. As per the latest report by consultancy firm HVS Anarock, the occupancies in the Indian hotels dropped 81.8 per cent in April 2020 compared to corresponding month last year. Among the large Asian markets, India reported the second-largest drop in occupancies just behind Thailand where the occupancies dropped 90 per cent. At the same time, countries like Malaysia, China and Singapore have performed better than India with lower drops in occupancies.

Since the lockdown that came into force from March 25, the demand for travel and tourism services has dropped considerably. Most hotel chains operate just a small percentage of their hotels for stranded guests, and corporate clients who want to offer their critical staff a safe accommodation while supporting business continuity.

Also Read: India's Q4 GDP growth falls to 3.1% - worst since 2009 global financial crisis

The other key parameter ADR (average daily rate) has come down sharply as well. For instance, the average room rate for a branded hotel in April was Rs 4,113 per night, which was 27 per cent lower than the ADR in the same month last year. More importantly, the RevPAR (revenue per available room) tanked 86.7 per cent year which shows the deep crisis in the sector. RevPAR, which is a key metric to assess the performance of hotel industry, stood at just Rs 482 in April.

HVS Anarock's survey also reveals that most hotel general managers (GMs) expect things to improve from September onwards which is in line with the government's internal assessments. "We are expecting things to improve from September," said Meenakshi Sharma, director general (Tourism) at the Ministry of Tourism at a webinar.

Even after the September, the revival is likely to be slow-paced. For instance, 77.5 per cent of the GMs expect the occupancies to be below 50 per cent in the September-December 2020 period. Similarly, 74 per cent GMs expect the room rates to be available at a minimum of 10 per cent discount.

Also Read: Govt lowers GDP growth rates for Q1, Q2 and Q3 in revised data

Following the coronavirus-induced lockdown, the hospitality sector is in shambles. Being the backbone of the travel and tourism industry, hospitality generates annual revenues of $23 billion across 1,40,000 branded and 2.6 million independent hotel rooms. In the worst-case scenario (that is recovery beyond 2020), the experts are predicting $14.76 billion revenue loss for the sector.

It's also believed that once the demand picks up, the branded hotels would be in a better position to recover. How? That's because of the high level of service protocols and hygiene standards that are likely to be followed by branded chains that would give guests a sense of safety while staying in them. "As a result, independent and boutique hotels are likely to affiliate with brands to leverage their global distribution, high-tech booking systems, and most importantly guest confidence and trust. Conversions are expected to increase as it will be a win-win situation for both the hotel brands as well as owners, bridging the gap between the brand's expansion plans and the owner's concerns on operating hotels in the COVID era," said a note by HVS Anarock.

Also Read: Coronavirus impact: Output in eight core industries declines 38% in April