Hospitality sector faces Rs 600 crore loss, says research report

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The Indian hospitality sector will suffer losses of over Rs 600 crore this year, a research report prepared by a hospitality consultancy firm has said. The branded hotel chain together with the standalone hotel segment is facing losses of over Rs 150 crore. The alternative accommodation segment, dominated by bed and baths (B&B), guest houses and small lodges, is likely to make losses of over ₹420-470 crore, the report by Hotelivate said.

Layoffs of ‘casual staff’ or ‘contracted staff’ is likely, the research noted. This will amount to a weak Q4 FY20 and a weaker Q1 FY21.

According to the report, while January was still at par for the Indian hospitality industry. The industry had started to see early signs of recovery from February. “Unfortunately, business for the second half of March seems to have dropped off a cliff, pretty much across the board,” the report said.

“March has borne the brunt of many large-scale cancellations across the corporate, MICE and leisure segments. Notably, the extent of this lost business has primarily been seen across the top eight markets. Various Tier Two and Tier Three hotel markets in India continue to witness a small erosion in business for now, and occupancies in at least the first half of March were only partially lower despite the spread of the virus in some states,“ the report explained.

All the Indian carriers have suspended operations to international destinations and even the domestic sectors. “Our estimates are that the weighted impact of this situation is likely to erode the blended nationwide occupancy (in calendar year 2020) by about 18-20%, while the blended nationwide Average Daily Rate ADR may see a drop of 12-14% this year.

The reduced traffic to the hotels will also have an obvious cascading effect on revenue from F&B, MICE and other commissions. The Indian standalone and chain hotel segment has over 1.4 lakh rooms which accounts for only 5 per cent in the hotel industry segment.

According to the report, the overall loss of total revenue for the around 140,000 branded/organised hotel rooms across the country will be anywhere between ₹130-155 crore. “This amounts to a 27-32% erosion in the overall revenue as compared to last year.”

It has often been stated that the larger tourism industry in India contributes to about 10% cent of the GDP (approximately US$275 billion). It may not be an overstatement to assert that almost all of this revenue may dwindle to a painfully negligible amount if COVID-19 does not come to a halt this year.