Gap Review – Meaningful Recovery

"A Plea – Please give Hotel industry staff priority for vaccines. They are at the front-line, actively helping the fight against Covid-19."

The industry is downcast as the second wave and consequent lockdowns has materially curtailed, even shutdown, operations. While interstate movement is permitted, arrival testing protocols and fear of being ill in unknown territory will curtail leisure travel (the recent mainstay of demand); much reduced guest entitlements for weddings is another dampener. Clearly, the virus does not like financial years to end well and new ones to start well. Owners’ cash flow pressure will exacerbate, and risk of closures increase if lockdowns stretch beyond 4 weeks.

As we stare into negativity that comes with uncertainty, not knowing how long the tunnel is – or even if its a deep abyss – we can take heart from the fact that demand has been resilient when operations are permitted. The pace of recovery has reasonable strength.

If Q4-2020 got us 37.9 per cent all-India occupancy, Jan-Feb 21 combined stood at 50.7 per cent occupancy. Q4 -2020 had all-India ADR of Rs. 4,244, Jan-Feb 21 combined stood at Rs. 4,302. [Source: STR].

With most business travel materially curtailed, and only about 22 per cent of inventory being in leisure markets, the recovery of demand is extremely heartening. Rates typically recover with a lag and have remained muted – lack of business travel and inbound demand, greater demand share from second tier markets, and heavily discounted rates at big city hotels contribute to soft rates. Leisure destinations are faring well, particularly at upper tier resorts. IPL demand is certainly beneficial; it would be wonderful if organisers and owners would pay Rupee rates equivalent to what they paid in UAE last year – but, of course, we are in India and will bargain (or dictate) in a manner that doesn’t work overseas. I examine business recovery with two comparisons – combined Revpar for Jan and Feb 21 (J-F 21) compared with (a) combined Revpar for Jan & Feb 20 (J-F 20); and (b) average RevPAR for Jan & Feb of 2017-2019 (J-F 17-19). It is relevant to recall that some markets had started seeing the impact of Covid-19 restrictions in China and key Asian gateways in late Jan 20 and Feb 20. The second comparison reckons the recovery in 2021 against a somewhat longer trend which includes improved performances in 2018 and 2019.

Source: STR

At all India level, the recovery was almost 50 per cent over J-F 20; it was a bit slower when compared to J-F 17-19, falling short on both Occ and ADR. Importantly, Occ recovery was over 70 per cent.

The Big 3 metros – Mumbai, Delhi and BLR were similarly placed at about 1/3rd RevPAR recovery compared to J-F20. Mumbai was at the same level even when compared to J-F 17-19. However, BLR recovery is better when compared to J-F20, than when compared to J-F 17-19 because J-F20 was partially slower due to reduced inbound travel. On the other hand, Delhi had a good J-F20 relative to the previous 3 years, so that its recovery over J-F20 is lesser than when compared to J-F 17-19.

Among other metro cities, Chennai showed 50 per cent recovery. Kolkata had the highest occupancy among the metros in J-F 21 and recovered over 47 per cent Revpar over J-F20; its recovery over J-F 17-19 was only 45 per cent because the city has enjoyed higher ADR in those 3 years. Hyderabad, on the other hand, fared better in J-F20 than in J-F 17-19; as a result, recovery over J-F20 is only 39 per cent.

Leisure markets: Goa recovery for J-F21 was over 82 per cent of RevPAR for J-F20. Goa had declining Occ and ADR in recent years; accordingly, the recovery for J-F21 is only 74 per cent of J-F 17-19. Jaipur had the second highest recovery rate among ley markets (after Goa) with J-F21 RevPAR at 50.6 per cent of J-F20 RevPAR; ADR levels have remained soft.

Source: STR

Other main markets: RevPAR recovery is between 37 per cent to 41 per cent under both parameters. Chandigarh has done exceptionally well towards business recovery, with occupancy and ADR recovery being well over 80 per cent compared to J-F20.

Source: STR

Other markets: While specific data is not available for other markets, results for the main markets reflect that other markets have recovered materially in J-F21 relative to J-F20. While all India recovery is ~ 50 per cent, the big 3 metros are only at 33 per cent; only Goa (83 per cent) & Chandigarh (73 per cent) are materially above the 50 per cent mark, while Jaipur and Chennai barely breasted 50 per cent RevPAR recovery. Clearly several smaller markets, likely led by leisure markets but also second tier business and wedding markets, have enjoyed over 50 per cent recovery.

The recovery trend augers well for a good rebound once the current wave is handled. Business travel could start in the foreseeable future as vaccination programs get more fully implemented, thereby helping demand and ADR recovery in bigger cities and IT destinations.