Economy

Covid19 scare: As cancellations rise, future looks grim for hospitality

Forum Gandhi Mumbai | Updated on March 18, 2020 Published on March 18, 2020

Widespread travel ban and lock-down by many countries have complicated the problems for the industry   -  REUTERS

Bookings for peak summer season have plunged too, say industry players

The coronavirus pandemic has greatly impacted the Indian hospitality industry, with cancellations going up to 75 per cent. The overall business and summer holiday bookings are likely to be impacted by 25 per cent on a year-on-year basis, according to industry estimates.

According to Megha Tuli, Managing Partner & Co-Founder, Hotelivate, the hospitality industry is likely to see an impact of “20-25 per cent the business on an annualised basis.”

Pride Hotels and Sarovar Hotels expect a 20 per cent hit, whereas Lemon Tree expects the impact to go as high as 30 per cent.

 

Rise in cancellations

Sarovar Hotels has seen 70 per cent cancellations at their properties. Ajay Bakaya MD, Sarovar Hotels said: “Cancellations started coming in from the last week of February; they have snowballed through March and are very high.” Sarovar has 83 hotels in India and three in Africa.

Pride Hotels and Saffron stays have seen 30 per cent and 25 per cent cancellations respectively. LemonTree has over 80 hotels and wasn’t able to immediately quantify the cancellations, but a spokesperson said that there was a drastic rise.

The Federation of Hotel & Restaurant Associations of India (FHRAI) is expecting 80 per cent cancellations, and consultancy firm Frost & Sullivan is expecting 50-70 per cent cancellations from foreign tourists.

Along with cancellations, the hotels are seeing a downward trend in the average room rates (ARR). Pride Hotels has lowered their room prices by 5 per cent. For Saffron Stays, the lowered ARRs will be in force only till March 31.

Whereas according to Gurbaxish Singh Kohli, V-P, FHRAI: “Compared to the same period last year, December alone took a hit of approximately 40-50 per cent in the ARR; for the April to July period, if the situation persists, it could be anywhere between 80-100 per cent.”

According to top trends for 2020 by most OTAs, ‘bleasure’ (business plus leisure) travel from inbound tourists and domestic travellers was supposed to dominate the market.

Frost & Sullivan predicts that key business and leisure cities such as Mumbai, Bengaluru, Delhi-NCR, Hyderabad, and leisure destinations such as Rajasthan, Kerala, Goa, and Agra will be impacted because of the coronavirus outbreak.

“The worst-hit city for most hotel firms is Bengaluru, because it depends on companies located in Asia Pacific and Europe; most companies have issued ‘work from home’, which is also impacting hotels,” said Bakaya.

Besides Bengaluru, for Sarovar, the worst-hit destination is Kerala — so much so that Bakaya is planning to shut the Kerala property. “In our industry, we collect revenue and we pay everyone. In very serious cases, we are eyeing at a shutdown of properties,” he said.

However, Jaipur is still holding it’s occupancies for Sarovar, but they are not sure for how long that is likely to be the same way.

Summer holidays

April and May are peak seasons for domestic tourism, as well as inbound tourism from a few countries. According to Frost & Sullivan, if the situation does not settle down before May, the coronavirus pandemic will impact the summer vacation.

“It depends on how the situation evolves,” said Abhineet Kaul, Senior Director, Frost & Sullivan.

The counsultancy firm estimates that there will be a contraction of 5 per cent if situation normalise by mid-April. “Should the situation extend post April-May, the impact on business will be up to 50 per cent. Businesses and individuals will likely put bookings on hold until mid-April” Kaul added.

SaffronStays is pretty bullish that once things normalise, people who have cancelled their international trips will look for closer-to-home destinations for a quick getaway. Devendra Parulekar, Founder, SaffronStays, said: “People don’t want to take a risk by boarding a flight and they cannot stay under house arrest for long, they will need a quick getaway. Things will rebound big time for us, particularly from April 15 to June 15.”

Future projections

According to Hotelivate’s September 2019 report, the hotel industry had witnessed a steady but slower than expected growth in FY19 because of macro and micro headwinds.

Well, it looks like next year’s growth will be flat too. According to Frost & Sullivan: “Between April 2020 and March 2021, the overall impact will be flat, that means that the industry’s revenue growth per annum will be under 2 per cent for the industry,” said Kaul.

“The forward bookings for the inbound season of October 2020-March 2021, which typically begin around now, are completely at a halt. There are no new bookings at all,” added Kohli.

India has suspended visas, and banned the entry of people from several countries.

India is the South-East Asian headquarters for several multinationals. Most countries and companies are urging their employees to work from home.

Several international airlines have trimmed or discontinued their operations to Indian destinations.

It has impacted the Indian tourism industry and the hospitality industry in a cascading effect. This will clearly impact the industry’s year-on-year growth.

Published on March 18, 2020

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