After a subdued Q1, hotels seeing sharp month-on-month recovery

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Amid the pandemic blues, the operations of most listed hospitality firms have improved remarkably in the June quarter of the ongoing fiscal, in terms of the revenue per average room.  But that’s only when one takes into account the year-on-year performance. The first quarter of last year was a washout for the sector due to the nationwide lockdown. A quarter-on-quarter comparison or an assessment of the performance with the fourth quarter of FY21 as well Q1 of FY21 shows that the road to recovery for India’s hospitality sector, one of the worst hit by Covid-19 is long.

The management of the companies however firmly believes that if the month-on-month recovery continues and there is no third wave, in another six to nine months, hotels will get to the pre-pandemic levels. In an investor call on August 9, Puneet Chhatwal, Managing Director & CEO, Indian Hotels said that July has been better than the last three months and he expects the trend to continue.

“June was the month when things started coming back and thankfully, the period after getting a 4x growth in the number of cases, the period to bounce back after second wave was much shorter than what we saw at the outset of the pandemic. There is a month on month increase therefore in all parameters,” said Chhatwal. IHCL’s standalone revenue grew 118 per cent YoY (-55 per cent QoQ) to Rs 207 crore, led by an 101 per cent improvement in RevPAR.

East India Hotels that owns the Oberoi among other brands said the hospitality saw occupancy in all the major cities witnessed a month-on-month increase with the revival in leisure travel. Mumbai observed the highest occupancy (51-53 per cent) in Jun 2021, followed by New Delhi (39-41 per cent), primarily driven by staycation and weekend businesses, it said in an investor presentation.

Nandivardhan Jain, CEO and Noesis Capital & Advisors said, “The pain for business hotels will linger for another two to three quarters as sectors like IT continue to work from home and MICE (meetings, incentives, conferences, exhibitions) as a segment remains subdued with restricted travel and large format events being organised digitally. But hotels in cities that have exposure to manufacturing and other old economy sectors will see an uptick in demand. Meanwhile, properties in leisure locations will continue to be the savior for hotels as people throng to such locations for long stays."

Others concurred. "We expect the leisure and weddings segments to continue to drive the sector in the short to medium term. As offices open and travel restrictions ease further, along with the rise in the pace of vaccination, corporate travel is expected to gain momentum towards the end of the year,” JLL said in a  recent note.

The past 18 months have been nothing short of a roller-coaster ride for the hotels. Indian Hotel Company Ltd (IHCL) for instance saw its RevPAR (a combination of  average room rate and occupancies) jump (for domestic network of hotel brands) to Rs 1,331 in the June quarter of FY22 from Rs 513 in the year ago quarter. This is however still way below the Rs 3,229 it earned in the fourth quarter of FY21. Raheja Group’s Chalet Hotels also saw similar steep swings with its RevPAR rising to Rs 1,252 from Rs 926 in the year ago quarter but still being some distance away from the Rs 1,610 it earned in the March quarter. The management is cautiously optimistic about the future taking encouragement from the fact there was a sharp recovery post the second wave of Covid-19. Further, the nation is now better prepared to handle the third wave and the impact is expected to last for not more than two months, Chalet’s management told investors earlier this month.

The trend at Lemon Tree Hotels is slightly different. Its RevPAR dipped further dipped to Rs 700 from an already low base of Rs 759 in the year ago quarter. But the company is hopeful of the road ahead as it has seen a month-on-month pick since the beginning of the September quarter. It is seeing a V-shape recovery and it resembles Q4FY21 demand, company’s management said in an investors’ call earlier this month. It has had an increase in occupancy of over 70 per cent and an increase in average rate of about 20 per cent.


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