Pandemic takes the glitz out of luxury hotels as business traveling is crippled – The Economic Times

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Synopsis–New projects around the country will reduce the dependence on big city hotels to about 59% by FY25-26. Five years ago, the number was 69%.

Global mobility curbs have crippled business travel — and with it, luxury business hotels from Brisbane to Boston. Leisure destinations worldwide have been slightly more fortunate, with ‘staycation’ demand from WFH (work-from-home) professionals helping prevent that segment of the accommodation industry from foundering.

India isn’t an exception to this global trend. In a report titled ‘Indian Hospitality Stats and Pulse report FY 2021’ shared with ET, hospitality consulting firm Hotelivate said the story of FY21 will remain a case study for generations.

Last year, the average room rate was ₹4,013 from the earlier ₹6,031 in FY20, down about a third. Occupancies fared even worse, plunging about 50%.

Steep Declines
India’s story ties in with that of the entire region. Overall, Asia Pacific saw the sharpest decline in revenue per available room at -71%, compared with North America at -64%, or the Gulf at -56%.

The data, they say, have been collated from all organised hotel rooms available in the country (even for the period when they were closed during the lockdown). India has about 1.4 lakh organised rooms as of FY20-21 and there is a projected supply pipeline of close to 35,000 rooms in the next five years.

In FY21, nearly 64% of rooms in India came from the top 10 cities, including all major metros. But this will change. New projects around the country will reduce the dependence on big city hotels to about 59% by FY25-26. Five years ago, the number was 69%.

The impact was most significant for luxury hotels. Occupancy in the ritzy hotel rooms fell from 62.6% in FY19-20 to just 29.2%. The average daily rate fell from ₹12,093 to ₹8,640 in FY20-21 (projected). Economy hotels also saw a similar decline to 27.5% (projected) from 61.1% the year before. Bengaluru is highly probable to be the largest hotel market in India by FY26 by a comfortable margin, while Kolkata shall remain the smallest major market in the nation.

“Given the recent covid-related challenges of a near complete absence of IT and ITeS-related room night demand in Bengaluru, an added pressure of new hotel room supply in the coming years does not paint a very promising picture for the existing players there, unfortunately,” said Achin Khanna, managing partner, strategic advisory, at Hotelivate.

But there may be light at the end of the tunnel, given the pent-up demand.

“From near-zero occupancies across numerous hotels over the initial few months, to sky-rocketing ADRs at drive-to destination resorts, once leisure travel resumed in the winter months, the year’s events were a whirlwind that left everyone dizzy,” Khanna said.

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