Tuesday, 30 June 2020

Majority of hotel operators expect up to

Majority of hotel operators expect up to two-year revenue recovery period: JLL

  • 60% of the operators surveyed believe that it will take between 13 to 24 months for their portfolio to return back to 2019 RevPAR levels
  • 20% believe that their hotels could bounce back to 2019 RevPAR levels within 6 to 12 months from now
  • 53% of the total leading hotel operators have shut down more than 80% of their inventory during the nation-wide lockdown period
  • 53% of the respondents believe that key business cities are likely to witness an early pick-up in room nights demand
JLL, the largest real estate consultancy firm in the country has recently conducted a survey with 15 leading hotel operators in India having adequate presence across hotel segments in both business and leisure markets. The survey was conducted to understand the effects of the pandemic on development and opening of new hotels, as well as the support required for the sustenance of the sector.

The COVID-19 pandemic has brought the world to a standstill, with hospitality, travel and tourism sector being the most affected due to travel restrictions across the world and within India. In order to gauge the impact of the pandemic, following the survey, JLL Hotel and Hospitality Group has launched a whitepaper titled ‘Impact of COVID-19 on Indian Hospitality Industry.’

According to the survey, only 20% of the operators believe that their hotels could bounce back to 2019 Revenue Per Available Room or RevPAR levels within 6 to 12 months. Whilst 60% believe that their portfolio should be back on 2019 levels between 13 and 24 months from now. Luxury hotel operators are expected to ramp-up much slower with some expecting that their portfolio may take more than 2 years to reach 2019 performance levels. Qualitatively, the survey also indicated that business travel is expected to reduce in the post COVID-19 world as companies will rationalize spending on travel, which could, in a way, benefit branded economy and midscale hotels.

“The standard operating procedures will be significantly transformed to promote enhanced hygiene standards and to adopt technology to support social distancing policies. However, with the slowdown of hotel developments, capital assistance is needed to help hotels sustain until demand returns,” says Jaideep Dang, Managing Director, Hotels & Hospitality Group (India), JLL.

Currently, 47% of the operators expect to re-open their hotels for operation within 2 weeks of lifting of lockdown / travel restrictions by the respective state governments and 33% of operators expect to open within a week. Importantly, almost all operators believe that most hotels in their portfolio would need working capital infusion to continue or re-start their operations because the reserves have almost dried.

As the sector continues to build contingency plans to alleviate the fallout of the crisis, hotel operators are extending the hand of solidarity to their owners by providing certain relief measures. 67% of the operators surveyed confirmed that they are being approached by the hotel owners for financial assistance or relief, for example, deferring management fees, fixed system charges etc. providing much needed relief to hotel owners.

From repurposing a property to adapting new strategies and approaches to secure a strong come-back for hotel assets once the industry restarts, a multitude of things have to be considered from operational changes to strict hygiene measures. Hotel developments have slowed down, and most hotel openings are likely to be deferred by at least 6 months. Though unlock 1.0 has allowed hotels to open in a few cities, ride ahead seems bumpy with limited demand offtake for rooms, F&B and other recreational business. Hotels could rather earn better revenues serving as COVID support facilities in more affected cities such as Delhi and Mumbai.

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