Domestic hospitality industry to contract by 65% in FY21: Icra

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Mumbai: The domestic hospitality industry is likely to witness a decline of over 65 percent in 2020-21, according to a report.

There may be a recovery in demand in the later part of financial year 2021-22 as vaccine rollouts gains traction, it said.

In a report, rating agency Icra said it expects the industry to contract 65 percent in the financial year 2021, with massive operating and net losses, wiping out cumulative profits of the four past years.

However, a sharp demand recovery is possible in the later part of the financial year 2021-22, as vaccine rollouts gain traction.

Much though will be contingent upon the spread of the pandemic and success of vaccination efforts, the report said.

The situation is still evolving, with numerous headwinds as seen with the restart of crowd control and lockdowns, increasing India’s COVID cases and globally over the last few weeks.

Icra observed that pan-India occupancy hit an all-time low of 18-20 per cent in eight months of the financial year 2021, down from 64-65 percent in the previous year.

Although some sequential improvement has been witnessed since September, recovery is slow and arduous, punctuated by setbacks, it said.

“We expect FY21 RevPAR to decline by 70-75 per cent pan-India and close at Rs 900-1,000 per night. In FY22, industry will witness over 120 percent growth in revenues and operating margins clawing up to 13-15 percent,” said Pavethra Ponniah, Icra VP and sector head.

Since October 2020, there has been a sequential improvement in occupancy across all the key markets driven by improvement in leisure travel, it noted.

Hotels have enforced sharp cost control in financial year 2021, including a 39 percent reduction in employees’ costs during H1FY21.