Domestic travel, the saviour

With a focus on region-wise perspective on hotel performances and strategies, HVS ANAROCK recently discussed an incisive perspective on India.  Mandeep S. Lamba, President (South Asia), HVS ANAROCK, shares more…

Hazel Jain

By when do you see occupancies and RevPARs returning to normal levels?

We see occupancies coming back to pre-COVID levels around the third quarter of 2022 in India. We see RevPARs return to normal from second quarter of 2023. In terms of the segments, it is going to be leisure and the mid-management corporate short-haul travel. The mid-market hotels are what is going to lead this recovery.

How would you rate India vis-à-vis global hotel performances?

India is doing a slower start but getting there much faster. This is primarily because we have a less steep hill to climb. India had been performing below its potential and our RevPARs have been among the lower ones globally. Secondly, in India one of the remarkable things is our domestic market. If we just look at the numbers, our international arrivals are just under 11 million but domestic tourism is about 150x of that around the country.

So will there be a stronger focus on domestic market?

Our knights in shining armour are going to be the domestic traveller, and everyone is going to start focusing on them like they have never done in the past. That is where the recovery is going to come from. The second part of our recovery will be from our outbound market that will not be able to travel overseas and will start spending in the leisure markets in India. That’s why we see a quicker recovery happen.

Your advice to owners looking to sell right now.

This is not a great time to sell. But if your cash flows are not holding out and you have no other way of managing your cash flow, then there is no option but to sell. Other than that, I would advise everybody to hold on because the valuations will be a little depressed – reasonably depressed actually – if you sell now. So the best advice I can give hotel owners is that if you have the ability to manage your cash flows for the next 12 months, then just hold on.

Do you foresee any consolidation happening?

There will be some consolidation happening at both the domestic and the international level. This is an opportunity and people are looking at larger distribution, larger balance sheets. Therefore, there will be an opportunity to consolidate and I think there will be some consolidation that will happen globally. It’s only natural for a pandemic or a disruption of this kind to bring these opportunities into play. Not that they were not on the cards even after the big merger happened between Starwood and Marriott, others would also want to get the same scale.

Do you see any changes in the development costs?

In the short term, there will be a reduction in development costs. There are lessons that we have all learnt from the pandemic. In terms of the way hotels need to be built more efficiently, where they can be cordoned off more easily, areas are going to get smaller, especially in the South Asian and Asian context. Our large lobbies are going to get smaller; our staffing ratios are going to come down considerably. Capital costs are going to come down for sure. The challenge in the short term is going to be that banks are now not very fond of lending to hotels – not that they were so even pre-COVID for that matter. But now there seems to be even more risk for the banks.

Will the old excesses return or are we going to be like this for ever?

Everybody has short memories and we will start travelling again. But there is going to be a fairly long-term impact if not permanent in two segments of our business – corporate travel and M!CE. Ultimately, M!CE will come back though because of the sheer need for people to meet in person in large numbers, which technology may or may not be able to deliver. But corporate travel certainly is going to be impacted.

Which segment is going to see a long-term impact?

Boutique leisure travel is going to see exponential growth!