Hotels limp back to normalcy as business travel remains depressed

Recovery still far away; blended average occupancy up 28-30% in current quarter from 18-25% in three months to September

Hotels are limping back to normalcy albeit in an uneven way even as the business travel remains depressed.  Amid the gloom and doom, the re-opening of restaurants and the recent notification by the Maharashtra government which gives the hospitality sector industry status has come a relief said top officials for hospitality firms.  

Blended average occupancy across the hotels has inched up to 28 to 30 per cent in the current quarter from 18 to 25 per cent in September quarter, as per the estimates of consulting firm Hotelivate. The occupancy at leisure destinations is much higher ranging from 75-85 per cent.

Manav Thadani, co-founder, Hotelivate says, “Unlike the past, the current demand seen by the hotels, is for real and not Covid-induced that included Vande Bharat Mission (demand from states for institutional quarantine) and housing healthcare givers.Thadani doesn’t expect things to improve significantly till business travel picks. The recovery will remain patchy for some destinations and some properties till the first quarter of next fiscal.

While Mumbai and Delhi are showing better recovery, hotels in Bengaluru-- the IT hub, continue to struggle with very low occupancy as work from home practice becomes a new normal for IT companies, says Ajay Bakaya, managing director at Sarovar Hotels.

 

“Things won’t change in cities like Bengaluru anytime soon as IT companies are not in a hurry to resume offices,” says Bakaya, pointing out that business hotels are operating at 20 per cent occupancy in the city.

Sarovar presently has 82 out of its 92 hotels open. It ended last month with an average 33 per cent occupancy and expects it to inch up to 37 per cent in November and hopes to reach 50 per cent in by January.

“Right now it’s a different mix for everyone,” says Sanjay Sethi, managing director and CEO at Chalet Hotels. The asset owner for Marriott International, Renaissance, Four Points by Sheraton, among other brands, is seeing a good traction from shooting units of film industry and corporates who are travelling for specific projects. Staycations have also seen good traction, he said.

Others too are seeing sequential recovery. Lemon Tree for instance saw a gradual pickup in demand from its traditional segments like corporate travel, trade and retail.  In terms of room nights it increased from 19 per cent in Q1 to 33 per cent in Q2. It went up to 85 per cent in October, Patanjali Keswani, Chairman and Managing Director at the firm told investors in a post earnings call last week.

The re-opening of restaurants, a key ingredient of the overall F&B (food and beverage) revenue, has also helped. It accounts for anywhere between 40-50 per cent for most hotels.  The F&B has started looking up, said Bakaya: “People prefer to dine in restaurant of hotels that are more trustworthy as compared to stand alone ones.”  Sethi echoed similar sentiments adding that weddings—though in smaller formats, have seen lot of demand.

Meanwhile, amid all the gloom and doom, the Maharashtra government’s move to give the hospitality sector an industry status has been a shot in the arm for hospitality firms that have high exposure to the state. This means that once the policy takes effect from 1 April 2020, the electricity, water tariff will see a significant drop. The finance rates will also be relatively lower.

Chalet Hotels, the K Raheja group company will be a key beneficiary of the move. Chalet has almost two thirds of its inventory in the state. Depending on where one is sourcing electricity from --- state government or private players, the savings could be as high as 50 per cent, said Sethi.