According to rating agency ICRA, the hotel industry’s revenue and margins are expected to return to pre-COVID levels in 2022-23, despite a possible impact on demand in case of further waves of the pandemic.
Domestic leisure and transit travel will be the main demand drivers, although business travel and foreign tourist arrivals (FTAs) will improve gradually, ICRA said in a statement.
All India, premium hotel occupancy is expected to be 68-70% for FY23, it said, adding that the average room rate (ARR) is expected to be around 5,600-5,800.
“Maintaining cost-optimization measures along with improved operating leverage will support margins and accruals for hotels,” the agency said.
Irrespective of the potential impact on demand with further COVID waves, if any, ICRA said it expects industry revenue and margins to return to pre-COVID levels in FY13.
Vinuta S, Vice President and Sector Head, ICRA said that the hotel industry has made a good start in FY23 with 56-58 per cent occupancy in premium hotels in the first quarter of FY23.
He said it had climbed from 40-42% in FY12 and was close to pre-COVID occupancy of 60-62% in Q1 FY20.
“Pan-India ARR stood at around ₹4,600-4,800 in Q1 FY2023, as against ₹4,200-4,400 in FY2022. It still remains at a discount of 16-18% on average to pre-COVID levels, though some higher end The ARR in hotels and leisure venues has exceeded pre-COVID levels in the last few months,” Ms Vinuta said.
The improvement in demand was aided by a gradual pickup in leisure, transit commuters, micé/weddings and business travel and foreign tourist arrivals, while some cities also saw traffic from specific events.
MICE refers to meetings, incentive travel, conferences and exhibitions.
“While leisure destinations and gateway cities saw healthy occupancy, cities largely dependent on business travellers, such as Bengaluru and Pune, will take a few more months to recover,” she said.
Ms Vinuta said that although Q1 FY23 was one of the best quarters since the start of the pandemic, revenue per available room is 20-22% lower than pre-COVID levels and about 45-50% at the FY2009 peak. Been on a discount.
For mid-scale hotels, the recovery has been slow, owing to their dependence on business travel. Besides, cost inflation may also have an impact on the demand for mid-tier hotels, she said.
ICRA currently has a stable outlook on the industry, Ms Vinuta.