Hotel industry expects traction in occupancy, room rates in 2022: Study

The hotel industry in the country which bore the brunt during the COVID-19 pandemic is on the path of recovery with higher occupancy, increased average room rates (ARR) and spurt in merger and acquisition deals, a study said on Wednesday.

Domestic leisure travel is the driving force behind the road to recovery coupled with an increase in business travel, and with most organisations gradually resuming to a full or hybrid work-from-office model, it said.

In 2021, the occupancy was 42-45 per cent and the average room rate was Rs 4,300-4,600 which was higher than 2020 but less by 25-28 per cent compared to 2019 levels, it said.

 

We expect India-wide occupancy to improve to 66 per cent in 2022, along with a 28 per cent increase in ARR during the year. We expect occupancy & average room rates to return to pre-pandemic levels by the end of CY22 (calendar year) and by mid-CY23, respectively, HVS ANAROCK president (South Asia) Mandeep Singh Lamba said in the report.

The year 2022 started on a challenging note with subdued demand in the first few weeks because of rising Omicron cases in the country, and the accompanying travel constraints across states, the HVS ANAROCK hotel sector report said.

However, this has been a temporary stumbling block, as domestic travel demand is making a strong comeback since the cases subsided, and travel limitations were lifted.

Domestic leisure travel drove the recovery throughout the year, .additionally, weddings and social events, as well as the resurgence of small-to-medium-sized domestic MICE events, helped to stimulate hotel demand in 2021, it said.

Merger acquisition deals in the hotel sector are also expected to gain pace during the year as lenders seek recourse under the National Company Law Tribunal (NCLT) due to an increase in non-performing assets (NPAs) in the sector.

We expect to see greater deal activity in 2022 and onward. Due to the rapid recovery in domestic leisure demand, interest in acquiring assets in leisure markets will surge, especially as supply remains restricted in this segment.

Investors are likely to prefer operational assets or portfolio of assets to expand their footprint rather than greenfield or brownfield projects. Also, value deals where the lender and owner have both taken haircuts are the most likely to find buyers, the report noted.

Debt rationalisation will also be a key focus area for hotel owners and operating companies will revisit their debt liabilities and strive to rationalise and reduce the same, having learned the hard way during the pandemic, when companies with the largest debt servicing liabilities were impacted the most and struggled for survival, Anarock officials said.

However, amid strong revival, alternative accommodation like homestay or villa rentals will disrupt the hospitality industry, the report said.

Alternative accommodations will grow exponentially as these have piqued the interest of travellers who are opting for smaller, more intimate places for their getaways.

According to HVS Anarock, brand signing by 220 hotels for 17,500 rooms and scheduled opening is expected for 8,800 keys from 120 hotels in 2022.