Omicron spread likely to be less disruptive for hotel sector in Q1 FY23: Ind-Ra

Omicron spread likely to be less disruptive for hotel sector in Q1 FY23: Ind-Ra

India Ratings and Research (Ind-Ra) on Friday said the third wave of Covid-19 is likely to impact the operating metrics of the hotel industry in the last quarter of this financial year, but the effect will be less in the April-June period of FY23 due to easing of restrictions.

The overall revenue of all the hotel categories will fall by 5-10 per cent year-on-year for the first quarter of 2022-23, and the fourth quarter of FY22 will see revenue dropping by 25-30 per cent from its base case scenario, Ind-Ra estimated.

Moreover, as witnessed during the first two waves, the ebbing of the infection wave starts from metro cities, therefore, the minimal restrictions by both the Centre and state governments and self-restrictions by the people will start blurring away in a couple of months, Ind-Ra added.

Occupancy rates across the hotel categories are likely to fall, but the agency expects them to bounce back in a similar fashion as was witnessed during the first two waves while the impact on the sector would be fiscally benign, the report noted.

Further, the government and hotel operators have learnt from the impact of the pandemic and, therefore, have taken actions in a similar manner, it said.

Ind-Ra believes that unlike the first two waves, the overall impact will be benign in the first quarter of FY23 due to the pro-active preparation by the sector in terms of cost cutting during the times when the cases begin to rise.

As seen in the case of big hotel chains during the first two waves, the occupancy rates had fallen during the quarter in which the cases rose, but as soon as the cases started to rescind, there was an overall rise in the occupancy rates, it said.

Further, the restrictions by the Central and state governments have been minimal during the third wave, rather there are more self-precautionary restrictions by the people and the companies on travel, it added.

However, the recovery of the hotel sector will be more protracted and patchier due to the mass cancellation of planned events (marriages and business conferences) due to the limit on the number of people attending an event and thus limited room bookings.

However, like in the previous two waves, hotels in some cities could function as quarantine facilities, which will help shore-up occupancy, but this will have only a short-term impact on average prices, it said.

While the occupancy rates is likely to remain benign till the third wave starts ebbing, the agency opined the rates will bounce back like during the end of the second wave.

Small entities, however, may not have a recovery similar to larger ones since the preference would always be for those with the best hygiene practices, Ind-Ra stated.

The industry will face some challenges during the fourth quarter of FY22 in terms of occupancy rates, however, the sector will be back on track in the first quarter of 2022-23, as the cases will start rescinding and the mobility of the people will improve, the agency added.

Check the source here –Source, Financial Express.