Indian hospitality industry records lowest revenue per available room of last 22 years

Forum Gandhi Mumbai | Updated on September 29, 2021

Expects domestic tourism to recover faster than international travel but may take 2-3 years for the sector to reach pre-Covid levels

The Indian hospitality industry recorded a revenue per available room (RevPAR) of ₹1,582 during FY21, the lowest in the last 22 years, according to a report by Hotelivate. This, according to the hospitality industry consulting firm, is a 60.8 per cent decline over the last year.

The report analysed data from 1,200 branded and unbranded Indian hotels. According to the report, this performance was bought about by the hotels in this survey clocking an overall weighted occupancy of 34.4 per cent and a weighted average rate of ₹4,598.

Varying declines

As per the report, each star category has mimicked the nationwide trend of a decrease in occupancy, average rate and RevPAR. Two-star hotels recorded the lowest decline in RevPAR by 54.6 per cent, while five-star deluxe hotels witnessed a 63.7 per cent decline.

Although, five-star deluxe hotels witnessed the highest decline in RevPAR in terms of percentage points, it is important to note that previously, the category in question was the market leader achieving a RevPAR of over ₹7,000.

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Additionally, it is noteworthy that when compared to the five-star deluxe category, other categories recorded a marginally lower decline in RevPAR owing to domestic travellers leveraging the bundled rates provided by two, three and four-star hotels to attract customers. The lower star category hotels were able to provide attractive bundled rates due their relatively lower cost of operations compared to five-star deluxe Hotels.

Covid hit sector

Speaking to BusinessLine, MP Bezbaruah, Secretary General, Hotel Association of India, said that the domestic hospitality business has been one of the worst-hit sectors by the Covid-19 pandemic and concomitant lockdowns.

“We expect the leisure domestic travel and wedding segments to continue growth in occupancies for the short to medium term. With office openings, the upcoming festive season and rising vaccination rollout, corporate and leisure travel is expected to gain momentum towards the end of this year. However, the road to recovery will be contingent upon containing the pandemic and success of vaccination efforts,” he said.

Recovery in two phases

Hotelivate is of the opinion that the Indian hospitality industry will bounce back in two phases — the first, on the back of leisure travel in the short to medium term, owing to the sentiment of being “locked-up” in a confined space for a majority period of the past fiscal for the domestic travellers; the second, once corporates resume business-related travel, thus generating room nights for hotels in the medium to long term.

Historically, the majority of room nights generated via corporate travel has been catered to by two-star, three-star and four-star hotels and going forward, these categories are expected to bounce back at a relatively faster pace than the other two categories.

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“Overall, pent-up demand and diversion of outbound leisure travel to domestic tourism have been positive for the hospitality sector. Therefore, domestic tourism will recover faster as compared to international travel. Nevertheless, the sequential improvement in occupancies in the year 2021-22 will only place the industry on the recovery path and it is felt that it may take a minimum of 2-3 years for the sector to reach pre-Covid levels of cumulative profits,” Bezbaruah said.

To support this, he added that the Government should consider the basic demands of the industry — i.e liquidity support, incentives and industry status for the hospitality and tourism sector to save the industry jobs, business and livelihoods.

Published on September 29, 2021

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