India Hotels Outlook Impact of COVID-19 - HVS India & South Asia
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
hvs.com Follow us on
anarock.com HVS India & South Asia
India Hotels Outlook
Impact of COVID-19
India Hotels Outlook: Impact of COVID-19 1
The hotel growth cycle abruptly ended after 5 years
of consecutive RevPAR growth
The markets were set on a path to recover the grounds lost due to the past disruptive events and supply overhang as the year
2020 started on a positive note with strong performances in the first two months. The onset of COVID-19 and the subsequent
travel restrictions and nation-wide lockdown, however, has had an unprecedented impact on the sector.
RevPAR
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
2015 2016 2017 2018 2019 1H2020
INCREASE DECREASE Source: STR
India Hotels Outlook: Impact of COVID-19 2
Unprecedented downturn – Indian hospitality sector
Organised Semi Organised Unorganised
INR 40,309 Cr INR 8,379 Cr INR 41,126 Cr
REVENUE LOSS
31.6
percentage points
OCCUPANCY
57.8%
REVPAR
Estimated Total Revenue 2019 Estimated Total Revenue Loss 2020
INR 1,58,113 Cr INR 89,813 Cr
Note: HVS Estimate as on April 2020 Source: HVS Research
India Hotels Outlook: Impact of COVID-19 3Where do we go from here?
India Hotels Outlook: Impact of COVID-19 4Prior cycles did not witness severe erosion
in demand from disruptive events
Immediately post 2001 and 2008 crises, demand grew at strong rates following short term impacts.
Demand in the 2010 decade grew at 5.3% CAGR as against 10.8% CAGR in the 2000 decade.
30.0% Demand Change%
CAGR 2000-2009: 10.8% CAGR 2010-2019: 5.3%
25.0%
2000 DECADE 2010 DECADE
20.0%
Change in Demand
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
2005
2003
2001
2002
2004
2007
2006
2009
2008
2000
2011
2012
2014
2017
2016
2019
2018
2010
2015
2013
Sep 2003 Sep ADR
2001 (SARS) 2008 Pick-up
(09/11) (GFC)
Source: HVS Research & STR
INCREASE DECREASE India Hotels Outlook: Impact of COVID-19 5Prior cycles supply growth has varied with
a significant slowdown in the current decade
Supply growth in the 2010 decade has been substantially lower at 51% as compared to a 158% growth in inventory in the 2000
decade.
Supply Change%
30.0%
CAGR 2000-2009: 10.3% CAGR 2010-2019: 4.1%
25.0% 2000 DECADE 2010 DECADE
Change in Supply
20.0%
15.0%
10.0%
5.0%
0.0%
2005
2003
2001
2002
2004
2007
2006
2009
2008
2000
2011
2012
2014
2017
2016
2019
2018
2010
2015
2013
Sep 2003 Sep ADR
2001 (SARS) 2008 Pick-up
(09/11) (GFC)
Source: HVS Research & STR
INCREASE India Hotels Outlook: Impact of COVID-19 6Supply profile of major markets has transformed
Pune, followed by Bengaluru and Hyderabad, the tech epitomes of India, have witnessed the fastest growth in supply over the
last two decades. Bengaluru has risen from being the 5th largest market in the country to the 2nd biggest.
2000 2019
35000
6.3
Times
30000 5.7 14.3
Times
Times
25000
No. of Rooms
6.4
20000 Times
7.3
Times 11.1
Times 15.6
15000
Times
7.3
10000 Times
5000
0
Mumbai Delhi NCR Bengaluru Chennai Goa Hyderabad Kolkata Pune
Source: HVS Research & STR
India Hotels Outlook: Impact of COVID-19 7Supply profile of major Asian markets
India, however, continues to have the lowest proportion of branded hotel rooms compared with major Asian hotel markets.
Shanghai and Beijing are nearly 10 times the size of our major hotel markets.
300,000
269,269
250,591
250,000
No. of Hotel Rooms
200,000
150,000 137,748
95,040
100,000
72,541 75,147
61,730
50,000
29,499 24,667 25,842
-
Delhi NCR* Mumbai Bengaluru Singapore Jakarta Hong Kong Tokyo Shanghai Beijing Bangkok
Source: HVS Research & STR
India Hotels Outlook: Impact of COVID-19 8Prior cycles Occupancy change
Occupancy growth rates in the 2010 decade has been lower than the 2000 decade on account of supply absorption.
Since 2013, occupancy growth has recovered much of the lost ground until it was hit by the COVID-19 impact.
25.0% Average Growth 2000-2009: 0.6% Average Growth 2010-2019: 0.7%
2000 DECADE 2010 DECADE
20.0%
Change in Occupancy
15.0%
10.0%
5.0%
0.0%
-5.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sep 2003 Sep ADR
2001 (SARS) 2008 Pick-up
(09/11) (GFC)
Source: HVS Research & STR
INCREASE DECREASE India Hotels Outlook: Impact of COVID-19 9Prior cycles Average Rate change
The industry witnessed its largest rate growth in the 2000 decade @ 6.3% CAGR as the country’s economy opened post
liberalization and demand outstripped supply by a significant margin. Apart from 2017, average rate growth, post the GFC crisis,
has been limited in the 2010 decade growing at a CAGR of 1.7%.
CAGR 2000-2009: 6.3% CAGR 2010-2019: 1.7%
100.0%
2000 DECADE 2010 DECADE
80.0%
60.0%
Rate Growth
40.0%
20.0%
0.0%
-20.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sep 2003 Sep ADR
2001 (SARS) 2008 Pick-up
(09/11) (GFC)
Source: HVS Research & STR
INCREASE DECREASE India Hotels Outlook: Impact of COVID-19 10Outlook for demand
CORPORATE MICE LEISURE
Corporates are expected to put The number of International Corporate Domestic tourists will be major demand
restrictions on non-essential employee MICE travelers will be significantly drivers. ‘Revenge’ travel witnessed in
travel. Even for the essential employee reduced. China could foster among Indians too.
travel, allowance limits are likely to be
reduced. A large number of weddings planned at The ~25 Mn outbound Indian travelers
international destinations have will also be an attractive segment for
Senior Management travel also expected relocated to domestic destinations. The the leisure market.
to reduce in the short term. size of the weddings will be reduced.
Business Midscale & Economy Hotels to recover faster than Luxury & Upscale counterparts.
Leisure Luxury & Upscale Hotels to recover quicker than the Economy & Midscale counterparts.
India Hotels Outlook: Impact of COVID-19 11Outlook for Supply growth
As of May 2020, supply was forecast to increase at a CAGR of 2.8% during the 2020-2024 period. Given the recent events, supply
growth is now expected to be lower, and at a slower pace, than previously anticipated.
Under-construction Muted market Financing challenges Changes in market Some properties may
projects may face conditions will likely on account of conditions may close on account of
delays on account of lead to delayed negative sentiment render proposed financial stress and
labour shortages and openings; some for the sector is likely projects infeasible; as not reopen for an
issues pertaining to projects may be on to delay projects. a result, some extended period of
vendors and supply hold pending projects may be time, resulting in
chain. recovery. postponed or negative supply
canceled. growth.
Some properties are likely to be repurposed to other asset classes such as Hospital, Student Housing,
and Co-Living.
India Hotels Outlook: Impact of COVID-19 12We anticipate Occupancy & ADR to reach pre-COVID levels
by 2022 & 2023 respectively
The following forecasts for the India hotels industry reflects the current outlook of market participants, assuming recovery from
COVID-19 begins in the second half of 2020.
Average Rate RevPAR Occupancy 2020 Change %
₹ 6,000 80.0%
67.0% 68.0%
₹ 5,000
65.4% 66.2% 65.5% 70.0% -19.1%
57.5% ADR
60.0%
₹ 4,000
50.0%
₹ 3,000 34.5% 40.0%
-31.6
percentage points
30.0%
₹ 2,000 Occupancy
20.0%
₹ 4,850
₹ 6,448
₹ 4,834
₹ 4,384
₹ 5,830
₹ 3,794
₹ 5,997
₹ 3,967
₹ 5,793
₹ 2,782
₹ 1,675
₹ 3,812
₹ 1,000
₹ 4,114
₹ 6,141
10.0%
-57.8%
₹0 0.0% RevPAR
2018 2019 2020F 2021F 2022F 2023F 2024F
Demand
Change 3.3% 4.2% -47.2% 75.5% 17.9% 5.0% 2.7%
Supply
Change 3.0% 3.0% 1.2% 5.3% 3.6% 2.6% 1.2% Source: HVS Research
India Hotels Outlook: Impact of COVID-19 13Current forecasts in a historical context
‘Years to recover’ reflects the time from the event year to levels immediately prior to the major event. Both Occupancy and ADR
will recover much quicker in this cycle due to limited supply growth subject to vaccine being in place not later than 2021.
Years to Recover
09/11 (2001) GFC (2008) COVID-19 (2020) #
Never Recovered
Never Recovered
Never Recovered
3 3
2 2 2
1
Occupancy ADR RevPAR
# HVS Projections Source: HVS Research
India Hotels Outlook: Impact of COVID-19 14
14How will markets & hotels be affected?
More Vulnerable Less Vulnerable
• Full-service hotels, dependent on • Hotels that primarily rely on transient
group business segments
• Gateway markets that depend on Secondary and tertiary markets are • Economy and midscale business hotels
international travel expected to hold up better.
• Suburban, small metro town properties
• “Fly to” markets that depend on air Gateway and the top 10 metro
travel markets will witness short term • “Drive-to” resorts
volatility.
• Independent non-affiliated properties • Extended-stay hotels
Motorable Leisure markets could
• Upscale & Luxury Hotels which have see a quicker rebound. • Drive-to markets, which can be
over 50% international business expected to recover faster than those
dependent on air travel
• International leisure destinations with
high FIT or GIT movement • Properties affiliated with strong brands
15
India Hotels Outlook: Impact of COVID-19 15Final thoughts
This cycle could be unique in terms of the We anticipate Occupancy and ADR to reach
1 rapid and dramatic decline of demand, like 4 Pre-COVID levels by 2022 and 2023
never seen before, but there could be some respectively, with supply growth expected to
similarities to other cycles. remain dormant.
Supply growth is expected to slow Upscale/Luxury Leisure and Branded
2 significantly, as new or under constructions 5 Economy/Mid-market business hotels are
projects are delayed or abandoned and expected to lead the recovery growth in the
several highly leveraged assets are shutdown. sector.
The pace of immediate demand growth is The transaction market will witness high
3 corelated to the level of stimulus infused by 6 activity due to likely softening in values and
the government to revive growth, besides the increased availability of stressed assets.
availability of a cure and vaccine
India Hotels Outlook: Impact of COVID-19 16About HVS
Superior Results Through Unrivaled Hospitality
PLANNING
Intelligence. Everywhere. Site Selection
Market Study
Investment Search
HVS has been supporting the hospitality industry Product Recommendation
Financial Projections
in India and around the world for over 40 years. Financial Feasibility Analysis
Our senior staff represents a collective 300+ Economic Impact Analysis
years of experience advising our industry, Architectural Concept Design
including through multiple prior cycles and Construction Costs Estimates
events. DISPOSITION ACQUISITION & DEVELOPMENT
Exit Strategy Valuation & Pricing Guidance
Our expertise covers the full range of hospitality Brokerage & Advisory Appraisal for Financing
Adaptive Reuse Analysis Debt & Equity Financing
assets and spans the full lifecycle of a hotel, Shared Ownership Analysis Due Diligence Coordination
including services that support developers, Pricing Analysis Brand Selection & Contract Negotiations
owners, operators, lenders, and investors. Operator Selection & Contract Negotiations
Interior Design & Project Management
This knowledge and experience is available to Executive Search
support you as you navigate these challenging Pre-Opening Oversight
times. We are fully functional on a remote basis,
OWNERSHIP & OPERATION
so even though we are not currently traveling, our Asset Management
staff can access the full resources of HVS on your Management Agreement Analysis & Negotiation
behalf. Hotel Management
Appraisal for Refinancing
Let us know how we can assist you. Operation Performance Analysis
Repositioning Study & Valuation
Repositioning Design & Budgeting
Timeshare Conversion Review
Capital Improvement Financing
India Hotels Outlook: Impact of COVID-19 17Connect with us!
For any queries, please reach out to Our Services
Mandeep S. Lamba (MRICS) Akash Datta Brokerage & Transaction Advisory
President (South Asia) Senior Vice President – Consulting & Valuation Consulting & Valuation
mlamba@hvs.com adatta@hvs.com Asset Management
+91 981 130 6161 +91 989 951 7404 Executive Search
World’s Best-known Hospitality Advisory Firm with a Global Presence HVS ANAROCK Hotel Advisory Services Pvt. Ltd.
GURUGRAM
Level 7, Tower B, Building No. 9
DLF Cyber City, Phase III, Gurugram 122 002
50+ 350+ 6,000+ 60,000+ +91 124 488 5580
Offices Industry Markets Valuation
11 Specialists Analyzed Assignments MUMBAI
Concluded
Countries
1002, 10th Floor, B Wing, ONE BKC, Plot No. C-66, G Block
05 Bandra Kurla Complex, Bandra (E), Mumbai 400 051
Continents +91 22 4293 4293
© 2020 HVS ANAROCK Hotel Advisory Services Pvt. Ltd. All rights reserved.
Disclaimer: All information in this report is provided solely for reference purposes. HVS ANAROCK makes no statement, representation, warranty or guarantee
Follow us on
as to the accuracy, reliability or timeliness of the information provided. No part of this report may be reproduced, distributed, or transmitted in any form or by HVS India & South Asia
any means, including photocopying, recording, or other electronic or mechanical methods without the expressed written consent of the organisation.
India Hotels Outlook: Impact of COVID-19 18You can also read
