Omicron Spread To Be Less Disruptive For Hotel Sector: IndiaRatings

India Ratings and Research (Ind-Ra) opines that increasing intensity of the third covid wave in India could meaningfully impact the operating metrics of hotels across sub-segments and regions in 4QFY22, but the level of disruptions will be limited in 1QFY23. Since the sector depends completely on the mobility of people, the outbreak possesses a direct impact on the business performance of this sector. But, the impact across the sector will be lower because of lesser restrictions by central and state governments than in the first and second waves. Moreover, as witnessed during the first two waves, the ebbing of the infection wave starts from metro cities; therefore, the minimal restrictions by the government and self-restrictions by the people will start blurring away in a couple of months.

Occupancy rates across the hotel categories are likely to fall, but the agency expects them to bounce back in a similar fashion as was witnessed during the first two waves while the impact on the sector would be fiscally benign. Furthermore, the government and hotel operators have learnt from the impact of pandemic and therefore, have taken actions in a similar manner. Ind-Ra estimates the overall revenue of all the hotel categories will fall by 5%-10% yoy for 1QFY23, and 4QFY22 revenue will fall by 25%-30% from its base case scenario.

Benign Impact in 1QFY23

Ind-Ra believes that unlike the first two waves, the overall impact will be benign due to the pro-active preparation by the sector in terms of cost cutting during the times when the cases begin to rise. As seen in the case of big hotel chains during the first two waves, the occupancy rates had fallen during the quarter in which the cases rose, but as soon as the cases started to rescind, there was an overall rise in the occupancy rates. Furthermore, the restrictions by the central and state governments have been minimal during the third wave, rather there is more self-precautionary restrictions by the people and the companies on travel.