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Friday, 21 August, 2020, 15 : 00 PM [IST]

Occupancy & ADR to reach pre-COVID levels by 2022 & 2023 respectively: HVS Anarock Report

The dent caused by COVID-19 on the financials of the Indian hospitality industry has been huge. HVS ANAROCK recently released a report on the outlook of the industry, where it is estimated that the total revenue loss for the Indian hospitality sector in 2020 is estimated to be INR 89,813 crore.
The report anticipates hotel occupancy and ADR to reach pre-COVID levels by 2022 and 2023, respectively. The occupancy rate in 2020 is likely to fall by 31.6 percentage points from 2019 while Revenue Per Available Room (RevPAR) will be down by 57.8 per cent as compared to 2019.

“The pace of immediate demand growth is correlated to the level of stimulus infused by the government to revive growth, besides the availability of a cure and vaccine,” the report said.

Furthermore, commenting on the demand, the report said that the corporates are expected to put restrictions on non-essential employee travel. Even for the essential employee travel, allowance limits are likely to be reduced, while Senior Management travel is also expected to reduce in the short term.

The number of International Corporate MICE (Meetings, Incentives, Conferences and Exhibitions) travellers will be significantly reduced. “A large number of weddings planned at international destinations have relocated to domestic destinations, while the size of the weddings will be reduced,” the report stated.

“Domestic tourists will be major demand drivers. ‘Revenge’ travel witnessed in China could foster among Indians too. The ~25 million outbound Indian travellers will also be an attractive segment for the leisure market,” the report said.

The report stated some important supply growth outlook factors. It said that as of May 2020, supply was forecast to increase at a CAGR of 2.8 per cent during the 2020-2024 period. But given the recent events, supply growth is now expected to be lower, and at a slower pace, than previously anticipated. A key factor impacting supply growth is that under-construction projects may face delays on account of labour shortages and issues pertaining to vendors and supply chain. Further, financing challenges on account of negative sentiment for the sector is likely to delay projects. Muted and changed market conditions may render proposed projects infeasible and will likely lead to delayed openings. 

Lastly, the report anticipated that some properties may close on account of financial stress and not reopen for an extended period of time, resulting in negative supply growth while some properties are likely to be repurposed to other asset classes such as Hospital, Student Housing, and Co-Living.

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