Mid-market hotels will drive recovery

With a focus on region-wise perspective on hotel performances and strategies, HVS ANAROCK’s recent webinar discussed incisive perspective on India shared by Mandeep S. Lamba, President –South Asia, HVS ANAROCK.

Hazel Jain

By when do you see occupancies and RevPAR s returning to normal levels?

We see occupancies coming back to pre-COVID levels around the third quarter of 2022 in India. We see RevPARs return to normal from the second quarter of 2023. In terms of the segments, it is going to be leisure and the mid-management corporate short-haul travel. The mid-market hotels are what is going to lead this recovery.

How would you rate India vis-à-vis global hotel performances?

India is doing a slower start but is getting there much faster. This is primarily because we have a less steep hill to climb. India had been performing below its potential and our RevPARs have been among the lower ones globally. Secondly, in India one of the remarkable things is our domestic market. If we just look at the numbers, our international arrivals are just under 11 million but domestic tourism is about 150 times of that around the country.

So will there be a stronger focus on the domestic market?

Our knights in shining armour are going to be the domestic travellers and everyone is going to start focussing on them like they have never done in the past. That is where the recovery is going to come from. The second part of our recovery will be from our outbound market who will not be able to travel overseas and who will start spending in the leisure markets in India. That’s why we see a quicker recovery happen.

Your advice to hotel owners who are looking to sell right now.

This is not a great time to sell. But if your cash flows are not holding out and you have no other way of managing your cash flow, then there is no option but to sell. Other than that, I would advise everybody to hold on because the valuations will be a little depressed – reasonably depressed actually – if you sell now. So the best advice I can give hotel owners is that if you have the ability to manage your cash flows for the next 12 months, then just hold on.

Do you see any changes in development costs?

In the short-term, there will be a reduction in development costs. Our large lobbies are going to get smaller; our

staffing ratios are going to come down considerably. All of this is going to reduce the GFA (gross floor area) that we typically use to build hotels in this part of the world. So capital costs are going to come down for sure. But once the pandemic has settled and hotels have started re-bouncing, we will see a fair amount of development coming back. It is largely going to be mid-scale and upscale in India.

Outlook for demand amid the covid-19 pandemic

Corporate: It is expected that corporate will put restrictions on non-essential employee travel.

M!CE: The number of international corporate M!CE travellers will be significantly reduced.

Leisure: Domestic tourists will be major demand drivers. The 25 mn outbound Indian travellers will also be an attractive segment for the leisure market.

“If you have the ability to manage your cash flows for the next 12 months, then just hold on”