Long road to recovery for hotels, occupancy levels may take 6-8 quarters to reach pre-Covid levels

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Updated: Jul 09, 2020 8:48 AM

Analysts at the firm expect occupancy rates to pick up from the October-December quarter and end the year at around 35%, with a full-year average of about 25%.

The industry revival is likely to be led primarily by domestic tourists travelling for leisure purposes and opting for mid-market hotels, they said.The industry revival is likely to be led primarily by domestic tourists travelling for leisure purposes and opting for mid-market hotels, they said. (Representative image)

The hotel industry may take anywhere between six and eight quarters to reach the pre-Covid level occupancy rates, a report released by CARE Ratings on Wednesday said.

Analysts at the firm expect occupancy rates to pick up from the October-December quarter and end the year at around 35%, with a full-year average of about 25%. The industry revival is likely to be led primarily by domestic tourists travelling for leisure purposes and opting for mid-market hotels, they said.

If the pandemic is contained earlier, occupancy rates should climb to around 50% by Q4FY21, thereby attaining a full-year average of close to 35%. “In a pessimistic case where the impact of the pandemic is deeper, the expected occupancy rates would be lower ending at around 25% by Q4FY21,” analysts said in the report.

Foreign tourist arrivals (FTA) are expected to improve only in Q1FY22, considering that travel bans across the globe are likely to be lifted only in a phased manner. FTAs, which almost doubled from 5.4 million in 2010 to 10.89 million in 2019, recorded a year-on-year degrowth of 66.4% during March 2020, according to the report. “The impact of the pandemic has been most on the upscale segment since the FTA movement has completely dried up,” analysts said.

Analysts estimate hotels to continue seeing a decline in business-led bookings even in the post-Covid period as corporates have seamlessly shifted to holding webinars and online conferences that entails “minimal cost and added convenience”.

Though companies have been able to trim down their fixed cost to the extent of 25-40%, “the ability of hotel entities to withstand the crisis for any longer period would hinge upon the depth of their cash reserves, the robustness of their business models, and continued support from promoters”, the analysts added.

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