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How Does 2021 Look For The Hospitality Industry?
ICRA estimates that FY2021 revenues and margins are expected to decline sharply and that the industry will take over two years to reach normalcy and pre-covid revenue levels.
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It may seem that the declining number of coronavirus cases in the country and the promise of a vaccine may augur well for the hospitality industry. However, the emergence of the new virus strain in the UK and other parts of the world including India may mean that our uninvited guest, the novel coronavirus, is not going to be checking out any time soon.
As per a recent report by a business consulting firm, the average occupancy of hotels in India dropped from 65% in 2019, to an abysmal low of 9% during the first half of fiscal 2021 (including hotels that were not operational during the 180-day period) while branded hotel occupancy was at 23%. As per ICRA, the pan-India occupancy is expected to hit a multi-year low in FY2021 at 35-40% and consequently result in a sharp decline in RevPAR (Revenue per available room) in FY2021. ICRA estimates that FY2021 revenues and margins are expected to decline sharply and that the industry will take over two years to reach normalcy and pre-covid revenue levels.
However, this is not to say that the future of the hospitality industry is bleak. Far from that, the industry is seeing the return of leisure travel and socials. This may be seen by some as green shoots of recovery in the sector. The silver lining, however, is that most people are now learning to live and cope with the pandemic.
The pent-up demand for leisure travel will fuel the industry
There is already a huge pent-up demand for leisure travel. Plus, wearing masks, washing hands, and using a sanitizer has become second nature to a lot of people. Now, one can see that people have started venturing out, enjoying weekend breaks with families in tow, and trying to get back to the leisure side of their lives, albeit with some changes. This set of mask-wearing, sanitizer-wielding first-mover vacationers have started setting an example for others to follow. One can expect to see the demand growing from single-family unit holidays to extended families, to friend reunions, biking and trekking community outings, and other such bigger group holidays, over time.
Hotels have also stepped up by putting safety protocols in place with digital check-ins and check-out, socially distanced seating arrangements in lobbies, restaurants, banquets, making fewer tables available, and offering only ala-carte menus.
The hospitality industry will benefit from this trend as the number of leisure travelers will continue to swell all through 2021.
Corporate demand to stay sluggish
Corporate demand and MICE (Meetings, Incentives, Conferences, and Exhibitions) are still at a standstill and business hotels have not seen a surge in demand. This trend may last till June and slowly start picking up in the second quarter of the financial year of 2021. Yes, vaccines may offer hope, but implementation will take time. The way it looks right now, with restrictions on international travel firmly in place, the pandemic still raging, and lockdowns being imposed again internationally, business hotels may have to weather out the storm till the third fiscal quarter of the year. The industry will continue to see heavily discounted room rates being offered in larger branded hotels.
Small stays and boutique hotels to pick up pace in 2021
The boutique hotels and resort properties, on the other hand, may have something to cheer about. Premium boutique hotels are starting to see a surge in demand as guests prefer staying at smaller properties to keep pandemic worries in check. With workcations, staycations in vogue, these hotels are also seeing footfalls from people exploring such venues for work. These property owners should however note that a recent survey of consumers by a consulting firm showed that about 73% of respondents preferred staying at branded hotels due to the promise of better health and safety standards. Moreover, they are willing to pay a 15-20% premium on room rents only to ensure the health and safety of their families. This means that if boutique hotel owners can ensure high standards of safety to their guests and demonstrate these standards during their stay, then the trend will continue to remain in their favor through 2021.
It may seem that for the foreseeable future in 2021, leisure destinations and quality boutique properties are slated to grow faster than business destinations.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.