There was a sharp decline in RevPAR (Revenue per available room) for the Indian hospitality industry during the first three quarters of 2020. All key eleven markets in India reported a significant decline in RevPAR Performance in the third quarter of 2020 year-on-year (YoY).
Of the key markets, Mumbai had the highest RevPAR when compared to the other markets, despite its decline of RevPAR by 71.7 per cent in Q3 2020 compared to Q3 2019. The IT capital Bengaluru had the sharpest decline in RevPAR in Q3 2020, with an 88.1 per cent decline compared to the same period in the previous year according to JLL’s Hotel Momentum India (HMI) Q3 2020, a quarterly hospitality sector monitor.
The JLL's report observed that during the first three quarters of 2020, international operators dominated signings over domestic operators with the ratio of 53:47 in terms of inventory volume. It was also observed that there has been a demand in leisure destinations, especially during the weekends with further unlocking of restrictions from August 2020.
Besides Mumbai and Bengaluru, cities such as Pune, Kolkata and Goa also witnessed sharp declines in RevPAR. Total number of signings in Q3 2020 stood at 24 hotels, comprising 2,314 keys—a decline of 19 per cent compared to the same period last year.
Despite the downward slide, there were a few positive moves during this period. The Oberoi Group entered a long-term strategic alliance with the Mandarin Oriental Hotel Group to create unique culinary experiences and the Indian Hotels Company Limited (IHCL) announced the acquisition of the Sea Rock Hotel site to build an iconic sea front hotel in India. The Delhi government allowed hotels to reopen after five months in August 2020.
Besides this, Thailand’s Dusit International announced its re-entry into India in a partnership with the Jain Group. The tie-up will set up a 126-keys property in Kolkata at an investment of Rs 75 to 80 crore. The Reserve Bank of India (RBI) announced de-linking hotels from commercial real estate enabling hotels to seek capital loans from banks and ease out liquidity issues, especially for new hotel projects.
“Hotels and tourism have been amongst the worst impacted businesses due to the on-going pandemic. However, with the phased unlocking of the economy in the third quarter of 2020, we are witnessing gradual growth in demand, especially in the leisure markets. But business travel, which is the primary source of room demand, is yet to pick up and this can only happen once we see renewed confidence in people to start travelling again. In our asset operations, we have implemented several cost optimisation strategies, which will help us bounce back in 2021 and beyond,” remarked Vineet Verma, Executive Director and CEO, Brigade Hospitality.
According to Jaideep Dang, Managing Director, Hotels and Hospitality Group (India), JLL, investors were taking interest in exploring operational hotel opportunities, both in business and in leisure locations. “With the phased unlocking of the economy in the third quarter of 2020, we are witnessing gradual growth in demand particularly in the leisure market with weekend occupancy spikes,” said Dang.
According to another report on the Indian hotel industry by ANAROCK, the Indian hospitality sector is facing a revenue loss of Rs 90,000 crores in 2020. The report says there was, however, a slight increase in hotel occupancy that improved from 10 per cent in April 2020 to almost 26 per cent in September 2020.
“We anticipate the overall Indian hospitality sector (including organised, unorganised and semi-organised operators) to incur an estimated total revenue loss of Rs 90,000 crore in 2020. Occupancy and average daily rate (ADR) are expected to reach pre-Covid levels only by 2022 and 2023, respectively—assuming that a vaccine is in place by early 2021 and becomes widely available before the end of the year,” said Mandeep Lamba, President (South Asia) HVS ANAROCK.
In the backdrop of the Covid-19 pandemic, ANAROCK says guest perceptions and preferences have evolved rapidly, and hotels have been quick to fall in line. The focus is now on safety, hygiene and social distancing that is not only for the safety of guests but also hotel employees. The report observes that besides the mandatory sanitisation protocols, many hotel chains are also investing in new cleaning technologies such as electrostatic disinfection misters and ultraviolet light interventions.
“While domestic leisure travel is picking up, corporate demand is still subdued and will remain constrained at least for the short term due to companies’ cost-cutting measures. Most corporates are now using virtual meetings, events and webinars to connect with their stakeholders,” remarked Lamba.
The ANAROCK report further points out that the under construction hospitality projects may face delays on account of labour shortages and issues pertaining to vendors and a disrupted supply chain. Besides that, muted market conditions will likely lead to delayed openings and some projects will remain on hold pending recovery. There could also be financing challenges on account of negative sentiment for the sector and that may also delay projects. There is also a possibility that changes in market conditions may render some proposed projects infeasible, leading to indefinite postponements and also some properties may close on account of financial stress and not reopen for an extended period of time, resulting in negative supply growth.
“Prior to Covid-19, over 11,500 rooms were expected to be added to the supply in both 2020 and 2021. We can now expect only 15-20 per cent of the anticipated 2020 supply to come into the market, with the rest being postponed to 2021 and beyond. Some properties are likely to be repurposed to other asset classes such as hospitals, student housing and co-living,” pointed out Lamba.