Hotel industry bounces back after three years into the pandemic

• Resumption of international travels, conferences, G20 meets, and weddings are driving demand for hotels, say analysts.
• The demand for leisure travel has also sustained, analysts say.
• Mumbai, Delhi and Bangalore are likely to lead revenue per available room (RevPAR) growth, said a report by Nuvama Institutional Equities.

The hotel industry, which has been recovering from its pandemic lows for the last few months, is expected to post record earnings in the January-to-March quarter, expect analysts.

“Q4FY23 will be a record quarter owing to a sustained travel surge, bunched-up weddings and normalisation of international travel,” said analysts at Nuvama Institutional Equities.

Analysts say that the hotel industry has been in a recovery zone ever since the opening up of the economy with resumption of international travels owing to social events and corporate events.

“Leisure was the first segment to pick up during recovery; this hasn’t stalled or waned even after the economy opened up. International travel resumed as there were social events, corporate events and MICE. There is no slowdown in demand currently,” said the report.

More boost from G20 events
In spite of a good showing ever since the lockdowns ended, there is scope for more growth hereon, expect analysts.

“We believe, on the high base that the sector is at, incremental demand and supply shall be in sync, normalising rate movements. Key upside could come from sustained demand for leisure travel, normalising international travel and events such as the G20 summit,” said the Nuvama report.

Based on the G20 calendar, there are several events scheduled in March and April 2023 to be held in cities like Amritsar, Gandhinagar, Mumbai, Chennai, Udaipur, Visakhapatnam, Darjeeling, Guwahati, Hyderabad, Kumarakom, Goa, Varanasi, and Bhubaneswar.

The G20 holds annual summits where leaders from member countries gather to discuss global economic issues. India holds the G20 presidency this year.

From a high base
In fact, the strong performance of hotel companies in the December quarter reflects a strong uptick in demand.

Tata group hospitality firm Indian Hotels Company’s net profit in Q3 jumped four times to all-time high at ₹383 crore on the back of robust demand.

“Buoyed by a strong demand in the third quarter, both leisure and business hotels in key domestic markets reported occupancy of over 70% and a rate growth of 27% as compared to pre-Covid levels,” said Indian Hotels Company in an exchange filing.

Adding to it, even Lemon Tree in Q3 reported a significant jump in net profit, which rose to ₹48.6 crore as against a loss of ₹5.2 crore in the same period last year.

Mumbai, Delhi and Bangalore to lead regional growth for the industry
Analysts say that the demand outlook for the sector in 2023 will remain robust on the back of events such as world cup hockey and cricket, apart from the ongoing G20. It will also bode well for more price increases this year.

“For CY23, companies are budgeting average room rate (ARR) growth of 5–10% with a 2–5% increase in occupancies,” said a report by Nuvama Institutional Equities.

Reports say that hotel prices across destinations have risen in the last few months due to wedding season, return of corporate travel and events.

It states that most cities have bounced back growth from pre-Covid levels. The report said that Mumbai, Delhi and Bangalore are likely to lead revenue per available room (RevPAR) growth. Added to that, the report also says that tier-2 and tier-3 cities have seen a fair amount of growth too.


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