Recovery in hospitality sector takes a hit as Chennai hotels turn Covid hotspots

A spate of new Covid-19 infections across leading luxury hotels in Chennai and the consequent ban on banquets and public gatherings are likely to affect the occupancy levels of these hotel brands, and will further elongate the recovery of the pandemic-hit hospitality industry.

In the past few days, over 100 cases of Covid-19 were reported from two leading five-star hotels in Chennai. Following this, the civic authorities have directed the hotels to cancel all banquets and gatherings for 10 days. The State government has also instructed all hotels in the city to ramp up testing for coronavirus among its staff members.

Hospitality industry experts say that such instances, especially in luxury hotels, which are known for their world-class hygiene practices, will affect their occupancy levels, at least for the near term.

“Yes, this will have a significant adverse impact on occupancy levels as hotels are forced to cancel banquets. It will also discourage ‘staycations’. It will push back the recovery in hotels in the city, as guests turn wary,” said Pavethra Ponniah, Vice-President at ICRA.

Revival

The hospitality industry has been among the hardest hit by the pandemic. However, the sector has been witnessing a demand revival over the last few months. In a recent report, global real-estate services firm JLL said that hotel occupancy levels have grown month-on-month since September 2020 to cross 35 per cent sector-wide in November 2020.

The revival of the sector has primarily been driven by leisure ‘revenge travel’ during weekends and the festival season, weddings, and food and beverage demand, the report said.

Mandeep Lamba, President (South Asia) at HVS Anarock, a hospitality consulting and transaction advisory firm, said luxury hotels are known for their heightened sanitisation norms and strict adherence to governments SOPs (standard operating procedures). Hence, such incidents will not have a major impact on the occupancy level of hotels in the long run.

A hitch

“Such events, much as they are unfortunate and not to be underplayed, are likely to be a deterrent in the short term and will lead to even stricter control and scrutiny measures in hotels,” Lamba said, adding, “With the vaccine now a reality and around the corner, this will assist in significantly reducing the risk and gradually bringing the confidence back to the travelling population.”

ICRA’s Ponniah said that while FY22 will witness a strong uptick from the lows of FY21, recovery to pre-Covid levels for luxury hotels is still 2-3 years away.

“Ultimate timelines will be contingent on the roll-out of the vaccination and control of the pandemic in India and globally. Opening up of international borders for free movement is also critical,” she added.