Noesis Capital Advisors presents its report on ‘Hotel Performance for Q3 FY 2021’. The Indian hospitality industry has fared well during the third quarter of fiscal 2021. With an average occupancy of 39% and room rates of INR 3,680 per room, the industry is believed to be coming out of the pandemic woos.
Leisure destinations have performed well during the last quarter while the business destinations are yet to pick-up pace. Destinations like Udaipur and Goa have seen high demand surge during the quarter as relaxation of travel restrictions and opening up of multiple modes of transport allowed travellers to explore beyond the urban destinations within the 3-4 hour driving distance.
While the IT corridor of India is yet to pick-up pace and reach its full potential as the work-from-home culture continues for another quarter. With the vaccines rolling out now, it is expected the market across these corridors and top metro cities to show signs of revival and business travel once again picking up pace.
Across the top business destinations, room rates of upscale/luxury hotels have come down to mid-segment and mid-segment has come down to budget category. To capture a larger market share, room rates have dropped significantly. Some of the mid-segment hotels across the top metro cities have already touched 85% occupancy with a drop of 50% room rates and with lower employee cost & better efficiencies, they have managed to work on a GOP of 40% and above.
Mid-segment branded hotels have brought a cascading effect on the independent hotel owners by dropping their room rates and operating at par with independent hotels in terms of room rates of the pre-COVID levels. This has helped them to capture the larger share of the existing demand in the market and these green lines are helping them to service their debt to some extent.
Independent hotel owners have to work on a plan to regain their market share and compete with the branded chains. It is important to invest in product up-gradation, digital marketing to improve visibility, SOPs, training of staff, etc. to compete with the branded chains. This exercise for a single asset owner to bring the economies of scale is challenging and the ideal situation for them is to shake hands with a branded chain with high expertise either through the franchise or management contract route.
“With the easing travel restrictions the Indian Hotels sector is witnessing a recovery at a much faster rate than anticipated and leisure destinations across the country are expected to outperform the major cities in India in terms of occupancy and room rate growth,” says Nandivardhan Jain, CEO, Noesis Capital Advisors.