New projects will be pushed back by at least 12 months, especially the luxury category properties
The novel coronavirus, or COVID-19, pandemic has severely crippled the hotel industry by causing new guests inflows to trickle and pushing opening dates of new properties further into the future.
As per estimates shared by hoteliers and market analysts tracking the sector, new projects will be pushed back by at least 12 months, especially the luxury category properties, as there will be tendencies to downshift to save on costs.
JB Singh, President and CEO, InterGlobe Hotels, said, “We had four-to-five deals, which were on the cusp of getting inked, and these were in Goa, Pune, Delhi and Mumbai. At present, I am not saying we won’t develop or grow, but we have come to terms of how deep this problem is and how long it will continue and what are the other lines of funding I will get.”
InterGlobe Hotels, part of the same group which runs InterGlobe Aviation (IndiGo), has a partnership to set up hotels to be run under the ‘ibis’ brand of France-based Accor Hotels. The partnership has 19 operational hotels in India with around 3,000 rooms and has a pipeline of six properties having 1,100 rooms.
Around Rs 800 crore is lined up by InterGlobe Hotels for the six properties that will come up by 2022.
“A lot of our timelines are getting skewed. In February, we were expecting to open our hotels in March 2021 and 18 months after that we would have opened most of them. Now, there will be considerable delays, which would be for at least 12 months. Some of the projects have been closed down because of the lockdown,” Singh added.
As per TOPHOTELCONSTRUCTION database, there are a total of 158 hotel projects in the pipeline in India having 25,700 rooms. This includes 65 projects coming on stream in 2020 and the rest in 2021, 2022, 2023 and beyond.
“New hotel development will be impacted as there will be limited lender appetite, particularly in more volatile resort markets. 2020 started with a strong deal pipeline, with tradeable assets estimated around $1 billion. Investment action will likely get deferred as the sector rebuilds itself after containment of COVID-19. However, we estimate that more assets may fall in the ring for sale in the latter half of the year,” a report from JLL India said.
India’s hotel market is dominated by its domestic travellers who make up 80 percent of the guests. This is unlike many other countries that have to depend of foreign travelers for filling up vacant rooms. Despite this, hoteliers are staring at revenue loss, inching up to $11 billion this year, according to Hotelivate, a research and consultancy firm.
“Once the lockdown ends and hotels are able to reopen, Indian hotels should consider targeting the domestic leisure segment in the medium term,” Achin Khanna, Managing Partner, Hotelivate, said.
Several branded properties are being run currently with single digit occupancies. These comprise people who got stuck due to the lockdown, senior or mid-level executives deployed by corporates or rooms that are occupied by medical staff fighting the coronavirus pandemic.