India’s hotel and hospitality industry’s occupancy has declined sharply in the first quarter of 2020, as the COVID-19 outbreak impacts various segments of the sector, according to a report by JLL India.

Coming off a high-performance base in 2019, the Covid-19 outbreak and the containment measures introduced by the Centre have resulted in a severe drop in foreign and domestic travel, across both the tourism and business traveller segments.

“In the third week of March 2020, at an all India level, the hotels’ sector witnessed a decline of more than 65 per cent in occupancy levels as compared to the same period of the previous year. As travel restrictions around the world intensified further, second and third quarters of 2020 are likely to be similarly impacted,” according to the report.

The report estimates that at least 30 per cent of hotel and hospitality industry revenue could be impacted if the situation doesn’t improve by the end of June 2020. With more than 60 per cent of organised hotels in India already shut and several others operational with single-digit occupancies, recovery will be gradual.

Industry estimates indicate that in India, branded and organised hotels annual revenue is ₹38,000 crore ($5 billion). Corporate businesses will be left with less money to spend on travel, lodging and entertainment. Behavioural changes will lead to a reduction in socialising, which in turn will impact F&B in hotels.

All this will impact GOPs and further reduce yields to hotel owners. It is also indicated that the working capital of hotels will be stretched this year. Cost optimisation at all operational levels will be the key.

“FF&E Reserves would need to be cautiously utilised. Operators would need to support the hotel owners more than ever,” the report added.

“As the sector navigates turbulent times through the pandemic, growth and development of hotels in India is also likely to be impacted in the next two years. Any dry powder that is available today will focus more on buying operating assets rather than building new ones,” Ramesh Nair, CEO and Country Head, JLL India said.

Whilst, 2019 witnessed a shifting of concentration to mid-scale and affordable branded hotel segments, more established developers such as Prestige Group, Chalet Hotels and owner-operators such as Lemon Tree Hotels activated their existing land banks and announced expansion plans across key corporate markets in India.

The report indicates that the strong performance of the office sector was the key to robust hotel market performance across the top 7 business cities of India.

Tourism has always been a significant contributor to employment generation and a huge source of foreign exchange earnings for the country. This sector not only employs workers in cities but also provides livelihood to people across social strata in rural areas.

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