India GDP Q1 data: Hotel sector shrinks 47%; it will be a long road to recovery

Economic activity in sectors such as hotels and restaurants has been hit hard by the lockdown as hotels remained shut for months and vacationers were forced to stay home.

Vandana Ramnani

August 31, 2020 / 06:48 PM IST

Norfolk Hotel.

India’s hotel sector, one of the worst-hit segments of the economy, contracted 47 percent in the April-June quarter, data released by the National Statistical Office (NSO) on August 31 shows.

The sector saw a growth of 3.5 percent in the same period last year.

The drastic fall in numbers was reflected in the country’s economy that shrank by an unprecedented 23.9 percent in the June quarter, the first GDP contraction in more than 40 years as the coronavirus and lockdown ravaged businesses and disrupted the broader economy.

The hotel and restaurant industry bore the brunt of the outbreak and lockdown that restricted travel and forced people to stay home.

The restrictions resulted in a severe drop in foreign and domestic travel, across both business and leisure travel segments.

In 2019, the tourism industry contributed around 9 percent to India’s GDP and generated 87.5 million jobs, which is about 12.75 percent of total employment of 2018-19, according to the World Travel and Tourism Council (WTTC).

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WTTC had estimated the revenue losses of up to $ 2.7 trillion with 100 million jobs at risk globally. In India, the next one year is going to be the most difficult for the travel and tourism industry, with estimated revenue and job losses at $17 billion and 40 million (both direct and indirect) respectively, it said.

May 2020 experienced an occupancy decline of 77 percent over the same time last year. As per estimates, the occupancy in branded hotels in 2020 is set to decline by about 20 percent over 2019 and average daily rate (ADR) by more than 8 percent.

Reduced operational capacity and increased operating costs due to heightened safety and hygiene standards are some of the challenges hotels face when they reopen.

The viral outbreak hit occupancy in hotels across 11 major cities, resulting in a 29 per cent decline in revenue per available room (RevPAR) during January-March this year, a report by JLL India said.

While occupancy level fell in a range of 5-17 percentage points, the RevPAR was down 13-29 percent in 11 cities -- Ahmedabad, Bengaluru, Chennai, Delhi, Goa, Gurugram, Hyderabad, Jaipur, Mumbai, Pune and Kolkata.

According to the data, both the occupancy level and RevPAR went down in all the 11 cities.

The occupancy level dropped the most in Delhi which saw a 16.9 percentage points fall during January-March 2020 as compared with the year-ago period, followed by Jaipur at 16.4 percentage points.

There was a decline of 15.2 percentage points each in the occupancy level in hotels across Mumbai, Bengaluru and Gurugram.

Another JLL report indicated that business travel is expected to see a fall as companies will rationalise spending on travel. Most hotel openings are likely to be deferred by at least six months, it said.