ICRA revises outlook on Indian hotel industry to stableTravel And Tour World

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Published on : Thursday, April 14, 2022

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ICRA has revised its outlook on the Indian hotel industry to Stable from Negative in March 2022, following the swift demand recovery.

About 49 percent of ICRA’s ratings are on stable outlook currently.

The rating agency currently expects FY2022 revenues to be 60 percent of pre-COVID-19 levels, despite almost four months of impact because of COVID-19 2.0 and COVID-19 3.0.

The industry revenues are likely to return to pre-COVID-19 levels in FY2023, as against FY2024 earlier.

ICRA estimates pan-India premium hotel occupancy to be 40-42 percent in FY2022, up from 26-28 percent in FY2021.

While demand was impacted in January 2022 and for the first two weeks of February 2022 because of the Omicron wave, the industry has witnessed healthy recovery post that aided by leisure, transient demand, MICE/weddings and gradual pick-up in business travel.

Sharp recovery witnessed post-COVID-19

The recovery has been sharper than that witnessed post-COVID-19 2.0.

Pan-India premium hotel ARRs stood at Rs. 4,200 – 4,400 in FY2022 and were at a 25-30 percent discount to pre-COVID-19 levels.

However, for some high-end hotels and leisure destinations, ARRs have been higher than pre-COVID-19 levels in the last few months.

With significant improvement in demand, RevPARs are expected to improve to pre-COVID-19 levels in FY2023, as against the earlier expectation of pre-COVID-19 levels only by FY2024.

Fourth COVID-19 wave cannot be ruled out

While the possibility of a fourth COVID-19 wave cannot be ruled out, the increasing vaccination coverage and reducing disruption with each COVID-19 wave provide comfort.

ICRA expects that a month of complete lockdown could impact FY2023 pan-India occupancy by 5 percentage points.

Vinutaa S, Assistant Vice President and Sector Head, ICRA Limited, said, that easing restrictions, high pace of vaccination and pent-up demand resulted in recovery in leisure travel within the country in Q2 and Q3 FY2022.

Domestic business travel also started picking up, mainly to project sites/manufacturing locations from specific sectors, in Q3 FY2022.

ICRA’s sample of 11 large listed entities reported 50 percent growth in revenues on a QoQ basis in Q3 FY2022, better than ICRA’s estimates.

Owing to improved operating leverage and sustenance of some of the cost saving initiatives, the operating margins also jumped closer to pre-COVID-19 levels.

Despite the Omicron impact, they expect Q4 FY2022 revenues and margins to be better than Q2 FY2022.

The staff-to-room ratio continues to remain significantly lower than pre-COVID-19 levels aided by redeployment of staff, reskilling employees and centralisation of business functions.

With improvement in operating performance, coverage metrics are likely to be the best in H2 FY2022 since the start of COVID-19.

While Q4 FY2022 interest coverage is likely to witness some sequential moderation because of the Omicron wave, it is still expected to be better on YoY basis, Vintuaa added.

Leisure markets report strong occupancy

Leisure markets continued to report strong occupancy in H2 FY2022. Goa’s occupancy has been better than pre-COVID-19 levels since September 2021.

While Gateway cities like Mumbai and the NCR region have also witnessed healthy improvement in occupancy, Bengaluru and Pune were laggards because of muted business/IT sector travel.

However, they expect sequential improvement in occupancy in these markets over the next few months.

The recovery has largely been occupancy driven, with ARRs lagging in most markets, she said.

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Tags: COVID-19 pandemic, Hotel News, India


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