Economy

Covid-19 impact: Hospitality sector to see full recovery only by FY25

Forum Gandhi Mumbai | Updated on April 18, 2021

FY22 is likely to clock about 52.7 per cent occupancy

The Indian hospitality industry could be staring at a lull for at least for the next two fiscals. According to Hotelivate’s ‘Indian Hospitality-The Stats and Pulse Report’ the hotel occupancy to breach the 65 per cent threshold only by FY24, while pre-Covid average daily rate (ADRs) may be achieved by FY25.

Hotelivate has forecasted that FY22 will see a hike of a mere 18.9 per cent nationwide occupancy compared to FY21, which closed books on March 31, 2021 with only 33.8 per cent hotel rooms occupied. This, according to the data from the report is a degrowth of at least five years in hotel occupancy.

“FY22 may be tough, again! It will most certainly be a better year than FY21 though. With Covid cases rising in large numbers yet again, the first (and possibly second) quarter of FY22 are likely to remain under severe pressure. Forecasting in these uncertain times remains extremely challenging,” said Achin Khanna, MRICS Managing Partner, Strategic Advisory and Kush Anand Analyst, Strategic Advisory who co-authored the report.

FY22 is likely to clock about 52.7 per cent occupancy at an ADR of Rs 5016, while these numbers for FY23 are likely to be 64.9 per cent occupancy at Rs 5618.

“These estimates, especially for FY22, may need a downward correction if the recent surge in Covid cases witnessed over the past 10 days continues through Q1 of this new fiscal,” the hospitality industry consultancy firm cautioned.

The report further added that it was pertinent to note the fact that while the FY23 occupancy may appear to be lower than the pre-Covid occupancy of 65.4 per cent (FY20), the absolute amount of room nights sold will be higher, given the new supply that is probable to open between now and the end of FY23.

However, “it is expected that the occupancy to breach the 65 per cent threshold only by FY24, while we are of the view that pre-Covid ADRs may be achieved by FY25,” the duo added.

While on the topic of organized inventory, the report said that there were only minor alteration in the split of supply across a 10-year period, both when viewed by number of rooms as well as number of hotels.

However, when viewed as percentage growth in supply over 5-year periods, paint a different picture. Similar to the aviation industry-which is dominated by the low-cost carriers-the hospitality industry too seems to be tilting towards economy and midscale spaces.

The fact that while growth in supply when viewed in total rooms opened appears to have a similar quantum across positioning, the growth when viewed as the number of hotels opened is clearly more in the Economy and Midscale space. Smaller inventory assets in these positioning (largely in secondary and tertiary towns) is what has been (and will be) fueling new supply growth.

Published on April 18, 2021

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