Second wave of Covid derailed hotel industry recovery: ICRA
The second wave of the coronavirus pandemic derailed the recovery of the hospitality industry, which is now only expected to return to pre-Covid levels in 2023-24, according to the ICRA rating agency.
Since mid-April, the industry has been affected by lockdowns / mobility restrictions linked to the pandemic by various states and an increased reluctance to travel due to fear of contagion of infections, ICRA said. in a press release.
As a result, recovery to pre-Covid levels has now been pushed back 6 to 8 months from previous estimates. Revenue recovery to pre-Covid levels is currently expected by fiscal 2024, he added.
The industry was hit in the first quarter of the current fiscal year after two quarters of sequential recovery seen in the third and fourth quarters of the previous fiscal year, he added.
Commenting on the scenario, ICRA Sector Head and Deputy Vice President Vinutaa S said the intensity of ‘Covid 2.0’ was much stronger than the first and put a temporary brake on the road to recovery Of the industry.
“We expect a significant reduction in the Pan-Indian RevPAR (revenue per available room) estimates for FY2022 to Rs 1,300 to Rs 1,500, from a previously estimated RevPAR of around Rs 2,500. fiscal year 2022 is expected to be 60-65%. reset to pre-Covid levels, ”Vinutaa added.
While this is an improvement from the low base in FY2021, pandemic timelines present downside risks to the estimates. The situation is still evolving and remains dependent on the pace of vaccination, the effectiveness of vaccines, high infection rates and the possibility of a third wave of Covid.
“We expect a long road to recovery, with revenue recovery to pre-Covid levels expected only by fiscal 2024. ICRA continues to maintain a negative credit outlook on the sector,” said declared Vinutaa.
ICRA said the pick-up in demand in the second half of 2020-2021 was largely due to leisure travel, “stays”, MICE weddings and increased F&B revenue. Some business trips to specific sectors also contributed to the recovery.
However, with demand and occupancy falling sharply in the first quarter of fiscal 2022 due to the cancellation of several events, travel restrictions, revenues are expected to decline by 50-55% of a year. quarter over quarter, although the decline was smaller than in the first quarter of fiscal 2021, which was marred by the full pan-Indian foreclosure, he said.
The CIFAR industry sample is also expected to report operating losses in fiscal year 2022, although they are less than a single digit, compared to operating losses of 23. % observed in FY2021. This will be supported by better operational leverage and the continuation of fixed cost reduction initiatives undertaken in FY2021, the rating agency added.
“Debt levels increased in fiscal 2021, due to additional borrowing to meet financial and operational commitments and lower debt repayments due to the use of the moratorium provided by the RBI. Given the second wave and a delayed recovery, CIFAR expects the industry sample to report cash losses in fiscal year 2022 as well, ”Vinutaa said.
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