The Hospitality Industry in itself is very vast and includes lodging, food and drink services, event planning, transportations, and even theme parks, so the employment capacity is also quite high in this sector and with the National Lockdown in the country all this was severely affected. According to WTTC, India ranked third among 185 countries in terms of travel & tourism’s total contribution to GDP in 2018. India was ranked 34th in the Travel & Tourism Competitiveness Report 2019 published by the World Economic Forum.
During 2019, foreign tourist arrivals (FTAs) in India stood at 10.89 million, achieving a growth rate of 3.2% since last year. During January-February 2020, Foreign Tourist Arrivals (FTAs) were 21,33,782.
As of 2019, 4.2 crore jobs were created in the tourism sector in India which was ~8.1% of total employment in the country. The number is expected to rise by 2% annually to 52.3 million jobs by 2028.
Impact of COVID-19 on the hospitality sector in India
The hotel industry is severely impacted because of the spread of novel coronavirus. It has caused a loss of ~Rs 620 crore so far. According to a report by HVS and Anarock, India’s hotel industry is slated to incur a business loss of Rs 90,000 crore during this calendar year.
Various big hotel chains and small resort chains have started at losses over Rs 130 to 150 crores, whereas the alternate accommodation facility provider has suffered losses over Rs 420-470 crore which is huge and bad for the India market.
Indian hospitality and tourism industry in India accounts for about 10% of India’s GDP which is approximately 275 billion US dollars and if the virus does not stop in the coming days then further downfall in the GDP can also be accounted for which will worsen the situation in the future.
Financial Performance of Hotel Companies in the last quarter of the Financial Year 2020
Indian Hotels results partially reflected the impact of Covid-19. Revenue declined by 15% since last year to Rs 1,063 crore in the last quarter, primarily driven by a decline in revenue in March 2020. Revenue for January and February 2020 grew by 2%. EBITDA margin declined marginally to 19.6%. The net profit of Rs 74.3 crore was partially helped by exceptional gains of Rs 40.1 crore and a deferred tax credit of Rs 25.2 crore. The balance sheet remained strong with net debt to equity of 0.52x.
For Chalet Hotels, the impact of Covid-19 was clearly visible in its March quarter earnings. The profit of Rs 4.9 crore was enabled by the tax write back of Rs 37.3 crore. Revenue declined by 16% to Rs 227.3 crore as Hospitality segment revenue declined by 22% on the back of a 26% decline in Revenue per Available Room (RevPar). However, the Retail and Commercial segment revenue grew by 188%, though on a low base.
While the revenue growth for both the Indian Hotel and Chalet Hotel declined in the last quarter, Lemon Tree Hotels reported revenue growth of 17% primarily driven by a 48% increase in the number of rooms to 8,006 rooms. RevPar at Rs 2,764 declined by 19%. However, the RevPar for Lemon Tree (excluding the RevPar of Keys Hotels) declined by 11%.
Teji or Mandi?
The nationwide lockdown was imposed by the Indian government from 25th March 2020 to 31st May 2020, post which certain economic activities were permitted to commence in a phased manner. Hotels were allowed to begin operations from 8th June 2020. However, there were many difficulties in the smooth operations post 8th June 2020 as well. Certain state governments decided to extend the lockdown and insecurity among people regarding inter-state travel kept domestic tourism subdued during the first quarter of the current Financial Year 2021.
The emergence of digital meeting platforms restricted corporate travels even post lifting of the lockdown. Restrictions on dining at hotels and restaurants still continue, thereby reducing demand for the F&B segment of the hospitality companies.
However, during the lockdown demand from long haul guests, medical staff and quarantined guests kept the occupancy rolling in certain hotels. Most of the demand was price regulated while a large portion of the hotels remained shut during the first two months of the first quarter.
Thus our take on the sector is Mandi as the first 2 months during the first quarter was a washout and in the unlock phase too people are still not ready to step out into the hotels with a rising number of cases and a fear of getting corona. However, we at Teji Mandi feel that the industry will take at least a quarter or two to be back in action and will soon shine bright with colors and people once normalcy returns.
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