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Dec’22 industry RevPAR 13% above pre-Covid levels

As per HVS Anarock, Dec’22 was another strong month for the Indian hotel industry with industry RevPAR being 13% above Dec’19 (pre-Covid levels). Mumbai continued to clock the highest occupancies of over 80% for Dec’22 while Goa clocked its highest ever ARR of over Rs13,000 which is 31% higher than Dec’19 levels. As per our channel checks, with concerns around the possible impact of another Covid wave in India waning, forward hotel room rates for Jan-Mar’23 compared to the Jan-Mar’19 period (pre-Covid) indicate that hotels continue to follow a strategy of keeping rates at least 10% higher than pre-Covid levels (JanMar’20 was the first Covid impacted quarter, hence not comparable).

Heading into FY24, demand drivers such as the Government of India’s intent to leverage the G20 Summit as a launchpad to boost inbound tourism coupled with sports events such as the Men’s Cricket ODI World Cup in Oct-Nov’23 to be held in India may drive RevPAR growth for the sector. At the same time, we also remain cognizant of any headwinds in the form of global macro factors and discretionary consumption slowdown which may impact demand. However, given favourable demand-supply dynamics over the long term with industry demand expected to grow at 10% CAGR over FY23-26E vs. room supply CAGR of below 5% over the same period, we reiterate our ADD rating on Indian Hotels Co. Ltd. (IHCL) and BUY rating on Lemon Tree Hotels (LTH).

* Consistent improvement in industry ARRs and RevPAR seen in H1FY23: As per HVS Anarock, industry occupancies fell below 50% in Jan’22 owing to Omicron impact before recovering to ~55% in Feb’22 and 61% in Mar’22. This momentum carried forward into Apr’22 with occupancies reaching ~65% (same as Apr’19) of pre-Covid levels and Apr’22 RevPAR at Rs3,803 or 103% of Apr’19 levels. May’22 industry RevPAR of Rs3,744 was 10% higher than May’19 (pre-Covid levels) while Jun’22 industry RevPAR of Rs3,803 was 12% higher than Jun’19 levels. For Q2FY23, Sep’22 industry RevPAR was 105% of Sep’19 levels, Aug’22 industry RevPAR was 109% of Aug’19 levels while Jul’22 industry RevPAR was 105% of Jul’19 levels.

* Dec’22 industry RevPAR 13% above pre-Covid levels: In Oct’22, while industry ARRs were again 11% higher than Oct’19 levels at Rs6,700, overall occupancy was lower by 300bps at 57% in Oct’22 compared to Oct’19 levels resulting in Oct’22 industry RevPAR of Rs3,820 or 105% of Oct’19 levels. In Nov’22, while industry ARRs were again 8% higher than Nov’19 levels at Rs7,300, overall occupancy was lower by 700bps at 69% in Nov’22 compared to Nov’19 levels resulting in Nov’22 industry RevPAR of Rs5,040 or 98% of Nov’19 levels. In Dec’22, industry ARRs were 15% higher than Dec’19 levels while occupancy was 200bps lower at 69% leading to Dec’22 RevPAR of Rs5,313 or 113% of Dec’19 levels. Mumbai continued to clock the highest occupancies of over 80% for Dec’22 while Goa clocked its highest ever ARR of over Rs13,000 which is 31% higher than Dec’19 levels.

* Dec’22 industry RevPAR 13% above pre-Covid levels: In Oct’22, while industry ARRs were again 11% higher than Oct’19 levels at Rs6,700, overall occupancy was lower by 300bps at 57% in Oct’22 compared to Oct’19 levels resulting in Oct’22 industry RevPAR of Rs3,820 or 105% of Oct’19 levels. In Nov’22, while industry ARRs were again 8% higher than Nov’19 levels at Rs7,300, overall occupancy was lower by 700bps at 69% in Nov’22 compared to Nov’19 levels resulting in Nov’22 industry RevPAR of Rs5,040 or 98% of Nov’19 levels. In Dec’22, industry ARRs were 15% higher than Dec’19 levels while occupancy was 200bps lower at 69% leading to Dec’22 RevPAR of Rs5,313 or 113% of Dec’19 levels. Mumbai continued to clock the highest occupancies of over 80% for Dec’22 while Goa clocked its highest ever ARR of over Rs13,000 which is 31% higher than Dec’19 levels.

Dec’22 industry RevPAR 13% above pre-Covid levels

According to the India Hospitality Industry Overview 2019 by HVS Anarock, the hospitality sector was expected to perform at similar levels of growth as witnessed in CY19 fuelled by a swift recovery and demand pick-up in the second half of CY20. However, with the sudden disruption in business due to successive Covid waves in CY20 and CY21 globally and across India, the hospitality industry has seen a lot of volatility in occupancies and room rates over the last two years.

In Q3FY22 (Oct’21-Dec’21 period), ARRs in leisure hotels across India recovered to pre-Covid levels along with occupancies, while business hotels continued to lag. While the onset of the Omicron wave globally and in India from Dec’21 raised fresh concerns, the relatively milder impact of the Omicron wave with a decline in Covid cases in India has led to a revival of sentiment in the hospitality sector.

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