HVS Market Report – Indian Hospitality Sector – Nine Month Performance Review

This article discusses the performance of the Indian hotel sector in the first nine months of 2021.

The first nine months of 2021 have been mixed for the Indian hotel sector, which is currently on the path to recovery thanks to the growth in domestic leisure travel. During the nine-month period ending September 2021 (9M2021), the industry experienced a 3-5% increase in RevPAR in India compared to the same period in 2020. As of 9M2021, the occupancy rate at the national scale was in the range of 41 to 44%, an increase of more than 9 percentage points from the previous year. As the occupancy rate increases due to pent-up demand in the market, average rates are struggling as hotels try to boost occupancy rates. Average rates fell by more than 19% in 9M2021 compared to the same period the previous year. Growing demand for domestic leisure travel amid restrictions on international travel allowed Goa to record the highest RevPAR in the country during the period, while Chandigarh recorded the strongest growth in RevPAR.

The year 2021 has started on a good note due to the strong recovery in leisure travel, spurred by a steady decline in the number of active cases and the start of the country’s vaccination campaign. This allowed the occupancy rate for the entire sector to reach nearly 50% in the first quarter, a first since the start of the pandemic. However, further restrictions and lockdowns in several states due to the devastating second wave in the country resulted in moderate demand in the second quarter of the year. Nonetheless, unlike in the previous year, when most hotels were closed or relied solely on quarantine activities to survive, this time hoteliers were proactive in focusing on alternative customer segments and ancillary revenue sources. , such as food delivery services, DIY signature meals, laundry services, etc. to weather the storm. Some hotels, especially in shopping malls, have partnered with hospitals to provide isolation and quarantine facilities. As a result, the occupancy rate was in the range of 26-28% during the quarter, compared to 15-17% during the same period in 2020. Average rates also started to improve, increasing by 5% in 2Q2021 compared to 2Q2020, when hotels were solely dependent on quarantine activities.

With fewer restrictions in the states and higher vaccination rates, travel demand rebounded significantly in the third quarter of the year. After the second wave, many began to travel again to escape the lockdown blues and work-from-home fatigue. Weekend getaways to motorized recreation areas and “stays” at luxury residences in cities have become popular travel options. As a result, the sector experienced an occupancy rate of 49 to 52% in the third quarter, with a RevPAR of 2,000 to 2,300 INR, which represents a 163% increase year on year.

We expect travel sentiment to remain positive in the fourth quarter of the year. The resumption of inbound travel and the on-going holiday season will fuel demand for pleasure travel to popular and off-beat destinations across the country. Business demand is also expected to improve steadily as most industries revert to a full or hybrid ‘work-from-the-office’ model and resume their business travel plans. As a result, we expect the sector to end the year with a national occupancy rate of 44-46%, up 9-12 percentage points from 2020. Meanwhile, RevPAR is expected to reach 1,900- 2,100 INR, which will contribute to the total revenues of the sector. to reach 50-55% of pre-COVID levels, provided we all follow appropriate COVID behavior while enjoying the festivities and the holiday season ahead.

Mandeep S. Lamba, President – South Asia, oversees HVS practice in South Asia. Mandeep has spent over 30 years in the hospitality industry, having worked with international hotel companies such as Choice Hotels, IHG and Radisson Hotels before becoming President of ITC Fortune Hotels in 2001. Having successfully built the Fortune brand in the mid-range hospitality sector in India, Mandeep has ventured into an entrepreneurial adventure for over 8 years, forming JV companies with Dawnay Day Group UK and Onyx Hospitality Thailand before joining JLL in 2014, as Managing Director, Hotels & Hospitality Group – South Asia. An established industry leader, Mandeep has won several awards and accolades for his accomplishments. Recently, it was named to Hotelier India Power’s Most Respected Hoteliers in India list for the second year in a row. Contact Mandeep at +91 981 1306 161 or [email protected]

Dipti Mohan, Senior Manager – Research with HVS South Asia, is a seasoned knowledge professional with extensive experience in creating research-based content. She is the author of several ‘point of view’ documents such as thought leadership reports, expert opinion pieces, white papers and research reports. Contact Dipti at [email protected]

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© 2021 Hotel News Resource


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Christina A. Kroll

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