Hotels may see 20-40% fall in occupancy rates in Mar-May due to COVID-19: Report

Mumbai: Hotels in India are staring at a steep 20 to 40 per cent fall in occupancy rates during the three months ending May as lockdowns due to COVID-19 (coronavirus) escalate, a report has said.
This is two to four times the impact the industry had seen during the 2008 global financial crisis, India Ratings said in a report.

While the plunge in occupancy could be 30-40 per cent for mid-scale and two-star hotels, the same for four-star hotels and above categories could be 20-25 per cent for the next three months beginning March -- which is peak season due to summer holidays and weddings, the report said, citing the increasing number of cities going under full or partial lockdowns.

On revenue side, hotels under the four-star or above categories could see 65-70 per cent fall in revenue per available room, while for two-star hotels it could be 50-60 per cent.

"Occupancy rates across hotel categories are likely to fall to their lowest levels in the last decade, materially impacting earnings. The industry in general may face challenges in debt servicing. The crisis comes at the peak occupancy season due to vacations and weddings before the onset of the monsoons," the rating agency said.

During the global financial crisis, the average absolute occupancy rates fell by over 9 per cent, with the highest fall being 10.40 per cent for four-star and above hotels, followed by three-stars at 8.5 per cent, it noted.

"If we consider the global financial crisis as a benchmark, the magnitude and the impact on the drivers of occupancy rate due to the pandemic is much larger," it said.

Markets like Singapore, Indonesia and Hong Kong, where the outbreak began in January, have seen sharp decline in occupancy rates -- much higher than seen during the SARS outbreak in 2003 when it fell to sub-20 per cent from around 70 per cent in China.