The demand in the hotel industry will be curtailed in the fourth quarter this fiscal, at least in January 2022, as the fresh COVID-19 wave with the Omicron variant dampening sentiments, rating agency Icra said on Thursday. With a sharp rise in infections in the last one week and several states imposing partial lockdowns, hoteliers are witnessing cancellations in January 2022 bookings and the enquiries for the next few weeks have come down, Icra said in a statement.

While the situation is evolving, the rating agency said, ”Until the end of last month, there was only some cut-down in discretionary business travel. Leisure travel largely remained unaffected in December and no major cancellations were witnessed”. Commenting on the situation, Icra Assistant Vice-President and Sector Head Vinutaa S said, ”With the emergence of the Omicron variant and sharp rise in infections, several states have imposed partial lockdowns. This will curtail travel over the next few weeks. We are witnessing cancellations and hotel enquiries have dropped”.

A month of complete lockdown will impact FY2022 pan-India occupancy by around 4 percentage points, she added. However, Vinutaa said, ”Notwithstanding the potential Omicron impact, we expect a healthy YoY (year-on-year) revenue growth for the hotel industry in FY2022 supported by Q2 and Q3 demand, closing at 50-55 per cent of pre-Covid revenues for the full year”.

The net losses are likely to be lower compared to FY21, supported by operating leverage benefits and sustenance of some of the cost-saving initiatives undertaken earlier. Hotels are likely to report pre-COVID margins at 85-90 per cent of revenues going forward, she added. Icra said the hotel industry demand had recovered at a sharp pace after the second wave of the pandemic aided by easing restrictions, the high pace of vaccination and pent-up demand. The demand for hotel stays in the last few months has come primarily from ’staycations’, weddings, travel to driveable leisure destinations, and special-purpose groups. Biscations — working from a resort — also saw traction in Q2 and the early part of Q3 FY22, it added.

In terms of destinations, the rating agency said leisure destinations like Goa and Jaipur witnessed healthy occupancy, with Goa’s occupancy being higher than pre-COVID levels in the last few months. Mumbai and Delhi also witnessed over 60 per cent occupancy since August 2021, while Pune and Bangalore remained laggards. The agency said it continues to maintain a negative outlook on the hotel industry. With the situation still evolving, it said, ”there could be a downward bias to our estimates in case of prolonged lockdowns”.

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