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EXPRESS EXCLUSIVE: COVID-19 impact on India hotel performance

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As governments across the world rush to protect their countries from the spread of COVID-19, the impact on business, global and domestic, has been and will continue to be significant. Among the sectors affected, travel advisories and restrictions have brought the travel, tourism and hospitality industries to a halt as airlines, hotels, restaurants and destinations have all suffered. Large corporate events and conferences are being cancelled, and even weddings and family gatherings are being impacted.

While it is important to remain up to speed with the impact this global pandemic has on business, it is important that we all stay cognizant of the fact that this is really about lives, more than it is about numbers. At the time this article was written, there have been more than 471,400 positive cases worldwide, with more than 21,200 deaths.

Source: Johns Hopkins University and Medicine – Coronavirus Resource Center

But in order to keep STR’s clients, partners and industries informed, we continue to monitor the hotel performance impact from COVID-19. We collect data from 68,000 hotels across 180 countries, and the past few weeks have produced gyrating effects from the spread of COVID-19. STR is entrusted with confidential and proprietary data, and it is important to note that the information shared in this story will not serve as a guide for pricing. Further, all commentary is restricted to facts.

In 2019, growth in the supply of hotel rooms was greater than growth in demand for rooms, which led to negative effects on revenue per available room (RevPAR) across the Asia Pacific region. This meant an already flattening curve for hotel performance in the region.

Since concerns around COVID-19 have broadened, the downward trend has intensified.

Hotels in Mainland China, the first country to see the effects, reported a staggering 89 per cent drop in occupancy within two weeks beginning with 15 January 2020. Other Asian markets such as South Korea, Vietnam, Japan, Thailand and Singapore, which are heavily reliant on China as a traveller source market, were significantly impacted soon thereafter.

Countries comprising the Indian Ocean, such as India, Sri Lanka and the Maldives, saw near negligible impacts up until the third week of February. For hotels in India, robust domestic demand coupled with a low number of COVID-19 cases could be attributed to a seemingly resilient February. It was only towards the end of February when the number of COVID-19 cases increased rapidly in the western regions such as Italy, France, the UK, US and United Arab Emirates – that too is when India started feeling the heat.

The impact on hotel performance in Sri Lanka and the Maldives began in March, when another key traveller source market, Europe, began locking down.

India RevPAR was down 4.1 per cent for February. The only markets in the country that grew RevPAR were Hyderabad, Gujarat, Pune and Gurugram. Hotel performance in markets such as Bengaluru, Mumbai, New Delhi, Gurugram was impacted immediately, given these markets are reliant on international and domestic corporate demand.

The chart below displays the RevPAR performance of key markets in India for February 2020, with India taken as the center. Red represents a RevPAR decline in comparison with February 2019, while green displays growth.

In the first week of March (1-7 March specifically), hotels in India saw a 12 per cent decline in occupancy, with RevPAR almost mirroring that trend. Pune was the only outlier, as an increase in average daily rate (ADR) drove growth in RevPAR.

Come the second week of March, the number of COVID-19 cases in India began rising, leaving no choice for India’s central and state governments to take stringent measures to curtail its spread. This was done by implementing travel bans, revoking visas and restricting some states to operate at full capacity.
Given this situation, hotels in India have seen significant client retrenchment, transient and MICE booking cancellations, international corporate travel pull backs and a general fear amidst domestic travellers to postpone nonessential travel.

Hotels in India saw a 43 per cent drop in occupancy during March 8 to 14 in comparison to the same period in 2019. A fall in ADR also contributed to a 49 per cent decrease in RevPAR.

Hotels across all markets in India were negatively affected across the three key performance indicators: occupancy, ADR and RevPAR.

International and domestic hotel chains in the country have attempted several measures to salvage this situation, but room booking cancellations have been ringing in by the second.

As a result, hotels have incorporated difficult measures in order to mitigate losses where possible. While hotels are cancelling room and event bookings without any charge to the customer, they are not refunding the amount – instead, they are giving customers credit notes to use for future bookings. Additionally, hotels have encouraged employees to take paid leave, laid off some contracted (non-pay roll) staff and shut down certain sections of the hotels, thus reducing employee laundry and saving on electricity and other maintenance bills.

Preliminary data for the third week of March (15-21) indicates an occupancy drop close to 70 per cent, with all markets declining more than in the previous week. Prime Minister Narendra Modi implemented a one-day trial of the Janata Curfew on Sunday, March 22, which was followed by domestic travel shutting down and the country entering a 21-day lockdown period. The severity of these measures will result in the hotel performance impact intensifying in the short to medium term.

As the situation evolves rapidly across the world, it remains to be seen how businesses adapt to the new world of social distancing the virus has created.

For latest updates on the impact of COVID-19 to hotel performance, please visit https://bit.ly/2JbzAZ4

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