With the emergence of recovery indicators, the hospitality sector has also witnessed a revival in room night demand in the last quarter of 2020, as compared to the previous quarters of the year, global professional services firm JLL has said in a report.
According to JLL, occupancy levels have grown month-on-month since September 20 to cross 35 per cent sector-wide in November 2020 (as per STR or Smith Travel Research data), which is the highest since the beginning of the nationwide Covid-19 lockdown in March 2020.
The revival of the sector has primarily been driven by leisure ‘revenge travel’ during weekends and the festival season, weddings and food and beverage demand, the report said.
Goa, India’s most sought-after leisure market, witnessed considerable growth in recent months achieving a market-wide occupancy level of almost 55 per cent in November 20. Luxury and upper upscale hotels in Goa performed well in November 20, achieving healthy occupancy levels ranging between 60 and 70 per cent as compared to occupancy levels in November 2019 that ranged between 65 and 75 per cent.
“Domestic business travel is expected to pick-up pace from March-April 2021 onwards, as employees return to workplaces and travel advisories by companies are softened. Additionally, domestic leisure will continue to drive occupancies across the country. F&B demand will continue to grow as eating out will increase albeit cautiously,” said Jaideep Dang, Managing Director, Hotels and Hospitality Group, South Asia, JLL.
With regards to investments in the sector, 2020 started on a good note with two large transactions totalling Rs 547 crore. Despite investment activity being paused since March 20, there are emerging signs of re-valuations and a slow demand revival, improvised cost structures and reduced profit levels in the next two years. Serious investors are giving prominence to debt service ratios, operating costs and suppressed demand from corporate travel, conventions, conferences and exhibition business, JLL said.
Furthermore, travel restrictions preventing site inspections and poor visibility of future revenue streams have added on to timelines of investment sales. Investors are mostly inclined to evaluate operational assets in key markets rather than greenfield developments. This trend is witnessed across India, according to the report.
Investors will likely firm up investment decisions as performance cycle picks up and fear of missing good deals may drive the investment activity, JLL said adding that in 2021 expectations are that domestic travel will pick up pace from March-April and onwards.
Large restaurants in hotels with all necessary health and hygiene protocols could start seeing the benefits from this demand and wedding ceremonies will likely take centre stage again providing seasonal impetus to the hospitality sector. Furthermore, repurposing of brownfield hotel assets for alternate uses such as co-living, senior living and student housing facilities may start happening, subject to demand in specific markets.