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Rating agency ICRA in its latest report has said that the hotel industry's revenues and margins are expected to return to pre-COVID levels in 2022-23 despite the potential impact on demand in case of further waves of the pandemic. It said domestic leisure and transient travel will be the main demand drivers, although there will be a gradual recovery in business travel and foreign tourist arrivals (FTAs). It said pan-India premium hotel occupancy is expected to be at 68-70 percent for FY2023, and added that the average room rate (ARR) is expected to hover around Rs 5,600-5,800. 

According to the report, the improved operating leverage along with sustenance of cost-optimization measures will support margins and accruals for hotels. Notwithstanding the potential impact on demand with further COVID waves, if any, it expects the industry's revenues and margins to return to pre-COVID levels in FY2023. The hotel industry witnessed a healthy start to FY2023, with 56-58 percent occupancy in premium hotels in the first quarter of FY23. It was up from 40-42 percent in FY2022 and closer to pre-COVID occupancy of 60-62 percent in Q1 FY2020.

The report further said pan-India ARR stood at around Rs 4,600-4,800 in Q1 FY2023, as against Rs 4,200-4,400 in FY2022. It remains at a 16-18 percent discount to pre-COVID levels on an average, although a few high-end hotels and leisure destinations witnessed ARRs spike to higher than pre-COVID levels in the last few months. The demand recovery was aided by leisure, transient passengers, MICE/weddings, and a gradual pickup in business travel and foreign tourist arrivals (FTAs), while some cities also witnessed traffic from specific events.