After bearing the brunt of several COVID-19 waves over the previous two years, the hospitality sector in India has made a solid comeback in calendar year (CY) 2022. The industry saw a strong resurgence in demand in CY 2022 as a result of the relaxation in travel restrictions on the back of vaccinations.
The Omicron wave at the start of CY 2022 caused a decline in travel, but later, the industry witnessed steady recovery.
During the year, hotel companies also resumed their deferred projects, and opened new properties to meet the travel demand.
Due to improved leisure travel, pent-up demand from meetings, incentives, conferences and exhibitions (MICE), weddings, a steady uptick in corporate travel and foreign tourist arrivals (FTA), recovery in the hospitality industry has been better than expected in CY 2022, believes rating agency ICRA.
"Although FTAs have been reasonably healthy, domestic tourism has been the prime demand driver," said Vinutaa S, Vice President & Sector Head - Corporate Ratings, ICRA Ltd.
"The strong recovery in demand is driving consistent increases in average room rates, with hotels, particularly in the leisure segment, outperforming pre-pandemic average rates," said Kavinder Singh, MD & CEO, Mahindra Holidays & Resorts India Ltd.
ICRA expects the industry to surpass pre-Covid demand levels in CY2023, aided by sustenance of leisure/ MICE demand and pick-up in business travel and FTAs. The rating agency has a stable outlook on the Indian hospitality industry.
Average Room Rates (ARR) and Revenue Per Available Rooms (RevPAR) trend during the year
Based on hospitality consultancy HVS Anarock's analysis of the ARR and RevPAR trend, brokerage ICICI Securities Ltd stated in its report said that the industry's ARRs and RevPAR gradually improved in H1FY23.
The brokerage in its report mentioned that according to HVS Anarock, Omicron's impact caused industry occupancy to drop below 50 percent in January 2022 before increasing to roughly 55 percent in February 2022 and 61 percent in March 2022.
In April 2022, this momentum continued, with occupancy levels remaining at roughly 65 percent (the same as in April 2019) and RevPAR coming in at ₹3,803, or 103 percent of April 2019 levels.
Further the brokerage with reference to the hospitality consultancy study noted that in May 2022, the industry's RevPAR of ₹3,744 was 10 percent higher than May 2019 (pre-Covid levels), and in June 2022, the industry's RevPAR of ₹3,803 was 12 percent higher than June 2019 levels.
For Q2FY23, the industry RevPAR for September 2022 was 105 percent higher than that of September 2019 levels, for August 2022, it was 109 percent higher than that of August 2019 levels, and for July 2022, it was 105 percent higher than that of July 2019 levels.
According to the brokerage, in October 2022, the industry RevPAR was 5 percent above the pre-Covid levels. "While the Apr-Jun’22 period was a blowout quarter for the hotel industry, the clear trend in Jul-Oct’22 is that hotels are holding on to higher rates in anticipation of a strong H2FY23.We expect business demand to see a strong pick up again from November 2022 onwards," said the brokerage.
Talking about business travel, Vinutaa S told MintGenie that as of year to date (YTD) (FY2023), the business travel demand was from manufacturing sectors and specific service sectors. Business travel from service sectors is expected to pick up further in Q4 FY2023. Impact of virtual meetings on business travel demand is not expected to be sizeable and that average length of stay has increased.
According to Vinutaa S, the industry has witnessed a healthy FY2023, with 64-66 percent occupancy in premium hotels in 8 months of FY2023. It was up from around 40-42 percent in FY2022.
"Aided by healthy demand, the pan-India premium hotel ARR stood at around ₹5,200-5,400 in 8 months of FY2023 and was only at a discount of 8-10% compared to the pre-Covid levels. A few high-end hotels and leisure destinations saw the ARR spike to higher than the pre-Covid levels over the last 6-9 months," added Vinutaa S.
Technical views on the stocks
Indian Hotels Company Ltd's stock price has given a return of over 70 percent so far in CY 2022. According to analysts, in the last couple of months, the stock prices have traded in a range, but broader trend remains positive.
"Dips can be taken as a buying opportunity with 285 level is seen as strong support, and the potential target of 350 level," said Rajesh Bhosale - Equity Technical and Derivative Analyst, Angel One.
Lemon Tree Hotels Ltd has gained 80 percent YTD from December 2021 closing. According to Bhosale, the stock, after marking all-time high during the start of December at ₹103.40 level, has seen a vertical fall. Currently, it is placed at ₹80 level, which is considered to be a strong support. One can buy with strict stop loss of ₹72 level, and upside target of ₹95 level.
Shares of Chalet Hotels Ltd have given more than 50 percent gains, but in the recent past, analysts have witnessed volatile swing on both the sides.
"This is a low volume counter, and hence can be avoided. As far as levels are concerned 304 is the immediate support, whereas 345 is resistance," added Bhosale.
Mahindra Holidays & Resorts India Ltd stock has gained 35 percent in CY2022. However, recently the stock broke below key support levels. According to Bhosale, going ahead, “the stock may face resistance around 270 levels, and on the flip side 240 level is immediate support.”
