ICRA downgrades Indian hospitality sector from stable to negative outlook

Rating agency ICRA has revised the outlook on the Indian hospitality sector from stable to negative, following the global spread of COVID-19 pandemic.

Since India reported its first coronavirus patient on January 30, the impact on Indian travel and tourism industry has been severe, more so during March as corporate actions on localised containment was followed by sharp clampdowns by the government on a pan India basis.

Apart from state-level clampdowns like in the case of Kerala and Maharashtra, the government has imposed sweeping visa and travel restrictions, heightened airport screening and announced plans to stop all international flights in the coming days.

Airlines have grounded fleet and several companies in India (and globally) have issued strong diktats on travel, deferring or cancelling all group activities.

"Occupancies across hotels in India have crashed by over 40 per cent in many cases. Cancellations are at all-time highs," said Pavethra Ponniah, Vice President and Sector Head at ICRA.

"Risk aversion to travel and unfamiliar surroundings is at a high. While India is far from witnessing hotel closures yet, containment in the event of a mass outbreak in India and operational viability of hotels at low occupancies could raise this question," she said.

"Given the scenario, the outlook has been downgraded from stable to negative."

ICRA expects the travel and tourism industry to witness one of the longest tail periods of impact, potentially running into multiple quarters, following the COVID-19 wave.

While some deferred travel, particularly for business, will re-flow in, room nights are essentially perishable commodities. Business on books for hotels, going into the summer months is low.

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