Distressed Hotels banking on a revival in Tourism

Hotels distressed by the impact of the Covid-19, having temporarily stopped operations, are now pinning hopes on the revival of travel in the country.....

Distressed Hotels banking on a revival in Tourism

Lords Hotels & Resorts, a mid-market hospitality company, was upbeat about its new management contract property in South Goa, which opened in October 2019. The pandemic struck just as the 110-room property was getting a foothold on Varca Beach. Lords' Senior Vice-President informed Times of India that the owner was unable to reopen the property post-lockdown. With the electricity bills piling up, the property was shut permanently. Hyatt Regency Mumbai also suspended operations owing to the pandemic. However, these are not isolated cases.

Federation of Hotels and Restaurant Associations of India (FHRAI) predicts that 40% of hotel and restaurant properties have shut shop in the past year. Hospitality industry tracker STR's data enlists 270 hotels, comprising 20,000 rooms, having stopped operations temporarily in the country. The second wave has further aggravated the situation, with another 10-20% of establishments shutting down due to the lack of working capital and loans hard to come by.

Image Source: Times of India

Hospitality consulting service Hotelivate has determined that India currently has 1.4 lakh branded and 26 lack unbranded hotel rooms, with a combined debt of the hospitality sector estimated to be Rs.50,000 crores. The company estimates that India’s organized sector generally generates revenue of Rs.37,000 crores, while the loss last year can be anywhere between Rs.11,000 crores and Rs.30,000 crores. The industry has witnessed 25-33% job losses or lay-offs in the last year.

Industry survivors, including big chains like Taj, Oberoi, ITC Hotels, are pinning their hopes on the revival of travel with the declining second wave and are praying that there is no third wave. Indian Hotels Company (IHCL), the parent company of Taj, reported a loss of Rs. 720 crores in FY2021, with a 62% fall in revenue to Rs. 1,740 crores. According to IHCL's Annual report for 2021, foreign tourist arrivals (FTAs) dropped to just about 27 lakhs in 2020, compared to over a crore in 2019.

Manav Thadani, Hotelivate founder chairman, said, “Covid has pushed back hospitality by four years in terms of occupancy and five years in terms of tariffs.”

Given the lengthy recovery period, it is unclear which hotels will survive. From this perfect storm will emerge hotels run-in properties owned by diversified groups with favourable debt-equity ratios.

Source: Times of India