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Hotel industry near full recovery from Covid; bookings on rise for leisure, MICE events

With the world recovering from the pandemic, the hotel industry has witnessed a surge in bookings, and expects a recovery to upto 70-80 per cent of pre-Covid levels. The rise in bookings are being mostly seen for leisure stays, MICE events and weddings.

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Hotel industry expects a recovery to upto 70-80 per cent of pre-Covid levels. Image: Bloomberg

After two years of downfall due to Covid related restrictions, the hotel industry is all set to reboot, recovering at 70-80 per cent of pre-Covid levels. This recovery is being pushed by leisure bookings and also MICE (Meetings, Incentives, Conferences and Exhibitions) events. “Today, we are at about 75-80 per cent of the pre-Covid levels. During the first wave, the fall was 80 per cent and even the remaining 20 per cent was the non-traditional business, related to the pandemic. So, the business was almost zero. With the way things are going, assuming there is no fourth wave, I think by Q1 or latest by Q2, we will achieve the pre-Covid run rate,” said Vikramjit Singh, President, Lemon Tree Hotels.

While this recovery in the hotel industry is being driven by leisure booking because of the vengeance travel by people after the third wave, it is also due to an increase in business travels including MICE events. “We expect a V-shape recovery for the hotel industry as we see a rise in ARR (average room rate) as well as occupancy percentage this year. At the moment, the bookings are standing at 70-75 per cent and we expect 80 per cent recovery of pre-Covid times,” Sarbendra Sarkar, Founder & MD, Cygnett Hotels and Resorts.

“We are expecting 2022 to be better with a higher share of occupancies and RevPAR (Revenue per available room), wherein now the dominance will be towards the leisure sector. Also, the forecast says that business hotels will do really well with MICE events and weddings already picking up pace,” said Sakar.

Meanwhile, Puneet Chhatwal, Managing Director, & CEO, Indian Hotels Co Ltd (IHCL), told PTI, “What we are experiencing in the last four to six weeks is such a strong revival. I can definitely speak for IHCL that our March, April and May (2022) business on the books is higher than March, April and May of 2019.”

The trends that will drive the industry

According to the Directorate General of Civil Aviation (DGCA), easing Covid travel restrictions, along with pent-up demand and base effect, accelerated India’s February domestic air passenger traffic growth on a sequential basis. This, in turn, has also added to more business at hotels across India. So, what kind of stays or booking are topping the list currently? According to industry stakeholders, the trend in the segment is being driven by staycations, and booking for leisure stays. “A large part of our business between the first and the second wave was staycation which predominantly drove the retail contribution for us. Staycation absolutely is here to stay. Also, I see a lot of pent up corporate demand going forward,” said Vikramjit Singh.

In terms of cities, leisure destinations and getaway cities of Delhi and Mumbai are gaining more traction. “Leisure travel demand continues to lead recovery, and we are hoping for a promising travel season as summer begins. Goa, Srinagar, Rishikesh and Mussoorie are some of the destinations that people are currently searching and booking hotel reservations in. Factors that continue to influence travel buying decisions are keenness to explore the undiscovered or hidden gems of the country, and willingness to splurge more on luxurious accommodations,” said a spokesperson from MakeMyTrip. The discerning travellers are opting for villas and homestays more actively than pre-COVID days, data from MakeMyTrip confirmed.

For Lemon Tree Hotels, tier-II cities in the likes of Patna, Aligarh, Jhansi, Indore are performing well while the metro cities are yet to get more traction with ‘large corporate travel yet to start post Covid’. While for Cygnett Hotels & Resorts, Goa, Nainital, Lucknow, Kolkata, Dehradun, Digha and Jaipur have shown positive results in terms of bookings. “Customers are now keen to explore local and offbeat destinations closer to home, take shorter trips during long weekends or public holidays, prefer travelling to short haul destinations via road trips, or even make the most of remote working,” said a spokesperson from OYO.

Will staying at hotels get costlier?

During the peak Covid waves in 2020 and 2021, many luxury hotels across India had slashed their room rates and introduced cost-cutting measures to weather the crisis. And now with the situation getting better, the industry players are going back to their usual prices and even planning to increase the room rates, going forward. “Presently, the demand is focused on holiday destinations, but it is when the corporate demand increases that the average room rates will increase. Hotels at holiday destinations are seeing a spike in bookings, but these may or may not sustain. Data for a month or two does not really reveal much for making sustainable projections. Now the industry will want to make the most of it. ARR will be dynamic under the circumstances and the rates may increase when there’s sufficient demand. If certain destinations are seeing good tourist footfalls, the ARRs will definitely increase,” said Pradeep Shetty, Jt. Hon. Sec., Federation of Hotel & Restaurant Associations of India (FHRAI).

With most parts of the country getting back to normal, there has been a substantial jump in occupancies and average room rates (ARRs) especially in luxury hotels and resort destinations. An ICRA report has pointed out that the recovery was hastened by the easing of restrictions in Q2 FY2022. Lemon Tree Hotels is looking at increasing their ARR by almost 65 per cent this financial year. “The focus right now is clearly on increasing room rates. The last two years saw almost no business and all the demand during then was stimulated by drop in prices. But now with the situation getting better, we are very clear that we will be increasing our rates. From Q1 to Q3 of this financial year, we will be increasing our ARR by almost 65 per cent,” said Vikramjit Singh.

Lessons learnt from the pandemic

Over the last two years, the hotel industry has transformed in line with the changing consumer behaviour, newer technologies, premium demands, more sanitisation requirements, etc. The industry recorded its lowest performance ever during the last two years. According to the FHRAI, in FY21, the hotel industry incurred losses of >Rs 1.30 lakh crore ($ 17.65 billion) in revenue. And it did pivot in every way possible to cope. While many of these changes were more pandemic focused, a lot of it changed the way this industry used to work and will work, going forward. “Hotels are short staffed even today and have to manage with limited resources. Cleanliness and hygiene, which are at the core of any hospitality business operations, have become even more stringent and the industry best practices took on a whole new level,” said Pradeep Shetty.

“There will be a 30- 35 per cent reduction in manpower, and this is not only in Lemon Tree but across the industry. We will become more efficient with the way we are doing our business. Manpower, which usually costs almost 20-22 per cent of the overall revenue, will be marginally reduced. This also will take the bottom line of the GOP up by at least 500-600 basis points,” said Vikramjit Singh.

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