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Pan-India hotel occupancy rate may hit multi-year low: ICRA
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SME Times News Bureau | 07 Jul, 2020
Ratings agency ICRA expects pan-India hotel occupancy rate to hit a multi-year low in FY2021.
According to ICRA's sector report, pan-India occupancy rate in FY2021 is expected to be 35-40 per cent.
The
pan-India average occupancy in FY2020 was down to around 65 per cent
from around 69 per cent in FY2019, and in '2M FY2020', it drastically
declined to 8-12 per cent.
"Occupancy declined in all the key
markets in Q4 FY2020 and YTD FY2021, impacted by the travel restrictions
and lockdowns to contain the virus spread. Only one-third of the hotels
were open in April and May 2020, with demand coming mainly from medical
or other frontline workers, stranded travellers and work-from-hotel
guests," the report said.
"Given the grim scenario, ICRA expects
the pan-India occupancy to hit a multi-year low in FY2021 at 35-40 per
cent and consequently result in sharp decline in RevPAR in FY2021. There
will also be adverse impact on other key industry parameters,
consequently."
As per the report, CY2020 will be the worst year
for International Tourist Arrivals (ITAs) and this is unlikely to
recover before CY2021.
"Progressive M-o-M and Y-o-Y decline in
ITAs were witnessed in Q1 CY2020. While ITAs grew by 2 per cent in
January 2020, they were down by 9 per cent and 57 per cent respectively
on Y-o-Y basis in February and March 2020," the report said.
"The
WTTC expects a decline of 58-78 per cent in ITAs for CY2020 with demand
revival linked to the speed of containment, duration of travel
restrictions or border shutdown; and the depth of economic recession."
As
for the recovery, the report cited that lower-end business travel will
recover first and group business and MICE segment will be the last to
recover as cancellations will continue well into the end of 2020.
Further,
drive-to-destinations will recover earlier than long-haul markets which
will take 12-18 months to recover, depending on a cure or vaccine.
"The
industry is expected to witness over 90 per cent revenue contraction
during Q1 FY2021 leading to severe cash bleed," the report said.
"Companies
are undertaking several cost control measures like head count
reduction, salary cuts, and deferring several costs; and variabilising
others like maintenance contracts, lease payments, etc. Going forward,
FY2021 revenues and margins are expected to witness sharp decline and
the industry will take over two years to reach pre-Covid revenue
levels."
In addition, the report said operating revenues are estimated to decline of 56-57 per cent in FY2021.
The operating margins are expected to "decline from 21.5 per cent in FY2020 to 12.8 per cent and the NPM to a steep loss".
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