The hotel industry is thriving with occupancies returning to pre-Covid level after a slowdown in business for two years due to COVID-19 impact, said the Economic Survey 2023 tabled in the Rajya Sabha on January 31.
The survey added that there are improvements in metrics including occupancy rate, Average Room Rate (ARR) and Revenue Per Available Room (RevPAR) which are now much nearer to the pre-pandemic level of FY20.
"Presently, the hotel industry is thriving with improvements in occupancy rate, an increase in ARR and a rise in RevPAR. The occupancy rate in November 2022 stood at around 68-70 percent, completely recovering the average pre-pandemic level of 2019-20," the survey noted.
Aiding the revival of travel demand was the high vaccination rate in the country, as also effective pandemic management that ensured speed in imposing as well as the lifting of mobility restrictions closely tracking the spread and subsiding of the virus, the survey said.
After a two-year hiatus, India also resumed all regular international flights at full capacity as 2021-22 came to a close. Consequently, the entire aircraft movement (cargo aircraft and passenger aircraft) in the country increased by 52.9 percent year-on-year (YoY) between April and November 2022, reaching 93.9 percent of the movement recorded between April and November 2019.
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COVID-19 impact on hospitality
The COVID-19 pandemic affected the fortunes of the hospitality and tourism industries in recent years, the survey said.
"The hotel industry closed 2020 with an average hotel occupancy rate of 33-36 percent, a decline of 32 percent. In the wake of falling demand and occupancies, hotels reduced tariffs significantly to attract business, thus, pulling down RevPAR to a dismal low of Rs 1,500 - Rs1,800, a decline of around 57-59 percent," the survey pointed out.
In the third quarter of 2021, hotel occupancy began a strong recovery driven by domestic leisure travel growth, partial resumption of business travel in the country, as well as wedding and social events. Small-to-medium-sized domestic MICE (Meetings, Incentives, Conference, Exhibitions) events also made a comeback, fuelling demand for hotels. The sector ended the year with an average occupancy of 42-45 percent, up 10-13 percentage points over the previous year.
The reintroduction of travel restrictions across states at the beginning of 2022 due to the emergence of a new COVID-19 strain, Omicron, again threw the Indian hospitality sector into an upheaval.
Other leisure and business travel plans were put on hold, barring critical and urgent travel as people exercised caution. The low demand resulted in an average hotel occupancy rate of 50 percent during January-March 2022.
However, due to the lower severity and hospitalisation rate of the Omicron variant, travel demand in India began its return to normalcy in March 2022.