Hotel Industry's revenue 10% above PreCovid levels

Hotel Industry's revenue above PreCovid levels

Market Outlook
by Shreya Anaokar Last Updated: 2022-07-04T12:56:02+05:30

The hospitality sector was anticipated to perform at similar levels of growth as experienced in CY19, fueled by a quick rebound and demand pick-up in the second half of CY20.

However, the hospitality sector has experienced significant volatility in occupancy and room prices over the previous two years as a result of the abrupt interruption in business caused by successive Covid waves in CY20 and CY21 globally and throughout India.

While business hotels continued to lag in Q3FY22 (the period from October 21 to December 21), Average room rates in leisure hotels across India rebounded to pre-Covid levels along with occupancies. The Omicron wave began across the world and in India on December 21, which sparked new worries, but its lesser effects and a drop in Covid cases in India have revived sentiment in the hotel industry.

Omicron's impact caused industry occupancy rates to drop below 50% on January 22. They then rose to 55% in February and 61% in March. With industry-level occupancies reaching 65% (the same as Apr'19) pre-Covid levels, industry-level average room rates of Rs. 5,850 (3 percent higher than Apr'19), and Apr'22 revenue per available room was at Rs. 3,803 or 103 percent of Apr'19 levels, this trend continued into April'22. The industry occupancy in May'22 was 64% (down 100bps MoM, but 200bps higher than May'19 levels), while the industry average room rate was Rs. 5,850 (flat MoM), which was 7% more than May'19 levels. As a result, industry revenue per available room for May'22 was Rs. 3,744, which was 10% more than for May'19 (pre-Covid levels).

There has been an increase in inquiries starting on April 22 due to pent-up demand following a two-year break as a result of several long-haul overseas destinations from India becoming available for travel, including Europe, the United States, and Canada. In FY23E, however, it's possible that Indians will continue to favor domestic leisure destinations (staycations, workcations, and weddings) and short-haul international routes (South East Asia/Middle East) due to rising international airfares and longer wait times for travel approvals amid rising inflation. Furthermore, pent-up demand and a weak currency may cause an increase in inbound tourism to India in H2FY23.

Pre-Covid occupancy levels of 66 percent are anticipated to be reached somewhere in CY22E/FY23E and 70 percent in CY24E. Average room rates are predicted to reach pre-Covid levels somewhere in CY22E/FY23E thanks to the anticipated ramp-up in occupancy rates.

Although the incremental room supply CAGR is now predicted to be between 5 and 6 percent for FY22 to FY26E, the actual addition of supply over this time may only be between 2 and 3 percent, with demand expected to increase by 15% in FY23E and by 10% CAGR from FY23 to FY26E.

 

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About the Author

Shreya Anaokar is a Content Writer at 5paisa. She has completed her Master’s in Finance and Graduation in Statistics from the University of Mumbai. 

Disclaimer

Investment/Trading is subject to market risk, past performance doesn’t guarantee future performance. The risk of trading/investment loss in securities markets can be substantial. Also, the above report is compiled from data available on public platforms.

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