The domestic hospitality industry, which has been severely affected by the Covid -19 related disruptions, is likely to witness a decline of over 65 per cent in 2020-21, according to a report.
However, there might be a recovery in demand in the later part of financial year 2021-22 as vaccine rollouts gains traction, it said.
In a report, rating agency Icra said it expects the industry to contract 65 per cent in the financial year 2021, with massive operating and net losses, wiping out the cumulative profits of the four past years.
However, a sharp demand recovery is possible in the later part of the financial year 2021-22, as vaccine rollouts gain traction.
Much though will be contingent upon the spread of the pandemic and success of vaccination efforts, the report said.
The situation is still evolving, with numerous headwinds as seen with the restart of crowd control and lockdowns, increasing India’s COVID cases and globally over the last few weeks, the report added.
The domestic hospitality industry has been one of the worst-hit sectors, severely affected by the COVID-19 pandemic and subsequent lockdowns, which restricted mobility and hotel occupancies in all the major markets, the Icra report stated.
Icra research observed that pan-India occupancy hit an all-time low of 18-20 per cent in eight months of the financial year 2021, down from 64-65 per cent in the previous year.The average room rates (ARR)s was at Rs 3,400-3,500 per night, a discount of 35-40 per cent, while the RevPAR declined by about 80 per cent during the period under consideration.
Although some sequential improvement has been witnessed since September 2020, recovery is slow and arduous, punctuated by setbacks, it said, adding that this will culminate in a weak financial year 2021.
“We expect FY21 RevPAR to decline by 70-75 per cent pan-India and close at Rs 900-1,000 per night. It will continue to be impacted by the lockdown, travel restrictions because of the virus spread.
“FY22 will see the industry witnessing over 120 per cent growth in revenues and operating margins clawing up to 13-15 per cent supported by pick-up in revenues and some continued benefits of the large-scale cost rationalisation measures undertaken during the pandemic, particularly in staffing,” Icra VP and Sector Head Pavethra Ponniah said.
However, to put these growth numbers in perspective, the optically high growth numbers for financial year 2021-22 will only place the industry on a recovery path to pre-COVID levels in 2-3 years, she said.