Hotel Occupancy Levels Improved To 35% In November 2020, Says JLL

Hotel - aviatorsbuzz
Representational photograph of a beach in Goa. Source: WIkipedia

With the emergence of recovery indicators, the hospitality sector has also witnessed a revival in hotel room night demand in the last quarter of 2020, as compared to the previous quarters of the year.

Hotel Occupancy Goes Up

Hotel occupancy levels have grown month on month since September 20 to cross 35% sector-wide in November 20 (as per STR data), which is the highest since beginning of the nation-wide lockdown in March 20. 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.

Goa, India’s most sought-after leisure market, witnessed considerable growth in recent months achieving a market-wide occupancy level of almost 55% in November 20. Luxury and upper upscale hotels in Goa performed well in November 20, achieving healthy occupancy levels ranging between 60% and 70% as compared to occupancy levels in November 2019 that ranged between 65% and 75%.

“Domestic business travel is expected to pick-up pace from March-April 21 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.

Hotel Investment Environment

Hotel investments in 2020 started on a good note with two large transactions totalling Rs. 547 crore. Despite investment activity being paused since March 2020, there are emerging signs of re-valuations and a slow demand revival, improvised cost structures and reduced profit levels in the next two years.

Hotel - FAITH - Kilimanjaro International - aviatorsbuzzAirport
Representational photograph of passengers headed on a holiday boarding a flight. Source: Kilimanjaro International Airport

Serious investors are giving prominence to debt service ratios, operating costs and suppressed demand from corporate travel, conventions, conferences and exhibition business. 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. Investors will likely firm up investment decisions as performance cycle picks up and fear of missing good deals may drive the investment activity.

Outlook for 2021

We expect domestic travel to pick up pace from March / April 21 and onwards, as employees return to workplaces and travel advisories by companies are softened. Till such time, domestic leisure will continue to drive occupancies across the country.

F&B demand will continue to grow as eating out will increase albeit cautiously. Large restaurants in hotels with all necessary health and hygiene protocols could start seeing the benefits from this demand and weddings ceremonies will likely take center-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.

 

Previous articleA320 – Fire Protection Systems
Next articleDomestic Aviation To Witness Around 57% Revenue Growth In FY22: Icra