In Delhi recently to participate in the 5th Conclave of Hoteliers organized by the Hotel Association of India (HAI), Jesper Palmqvistsenior manager – Asia Pacific, STRshared the findings of their report which marked the incredible story of market recovery that the Indian hospitality industry has witnessed through the various phases of the global pandemic and after the full reopening of travel.
Calling India’s hospitality industry recovery the fastest in all of AsiaPalmqvist said India “moved forward and never looked back” after the market reopened with a marginal decline in business in a short span. Omicron stage of Covid19. He said the “speed” of the Indian market recovery was absolutely staggering on the continent.
He said pent-up demand for leisure, business, etc. increased day by day after the reopening which affected all classes, categories, market levels in a homogeneous way. While a few hotels were leading the market, he said the others weren’t far behind.
“I do these charts, and I look at Singapore, Bangkok, New York, wherever you are, you have a few hotels that are doing extremely well. And then you have hotels in the middle and then hotels behind. In India, we’re seeing that the mix of that is actually the same as before COVID, which means it’s moving seamlessly, and that means you can have a much faster restart of the whole nation,” did he declare.
As far as tariffs are concerned, the demand is increasing every day. This has helped hotels increase their rates not once, but daily. And that cumulative effect over time has caused rates to rise to levels the market hasn’t seen in recent history, he says.
Unlike previous crises, people’s purchasing power did not decline during Covid and they were willing to pay a higher price to meet pent-up demand.
“And no doubt, India still has a lot of affordable hotels, compared to Western Europe or parts of the United States. Yes, there is a different budget for the domestic market compared to the international. But group travel has a higher rate than transit, it’s very different from elsewhere in the world. So, when you combine all these factors, that’s why the predictions of how fast India will come back and go beyond in 2019 are faster than many other markets, especially in Asia. India really stands out 100% from the Asian level,” he said.
Asked about the historical tendency of hotels to lower rates to propel demand and market share in the face of similar adversities in the past, he said the fundamental difference with the global pandemic of other crises like SARS and MERS to the global financial crisis of September 11 is that no hotel was spared by the pandemic.
“Covid had the magnitude of the biggest crisis but rebounded very quickly in a V-shape. If I look at what happened in the first three months of the crisis, the occupancy rate completely dropped with hotels closed but rates dropped by about half so rates went down but mostly that was because so many hotels were closed.
“As soon as the hotels reopened, the hotels saw very quickly that customers were ready to pay. And hotels had a completely different PNL to consider. It was therefore a new type of balance sheet for them to manage. And I think it was impressive how quickly he bounced back.
While leisure travel led the market recovery, business travel also gained momentum as markets reopened, he says. “Covid has brought some interim changes and some changes are final and will stay longer. We are still seeing a bit of restraint. But I believe a lot of that will soon fade away. One of the trends we are seeing is people wanting to organize events, too big events, in big cities now.”
However, recessionary trends in the global economy are something the hospitality industry needed to be alert and prepared for, he said. Many Wall Street-listed companies have already announced spending restraint to manage costs in the second half. Therefore, it is important to know how the hotel industry reacts to the changing situation in the global market. He predicts a growing trend of “bienisure” travel around the world, which hotels must prepare for with flexible packages.
Palmqvist is bullish on the outlook for the Indian market. He estimates that even after adjusting for inflationary pressures (7%), the Indian hospitality industry is on course to close 2022 either at par or close to pre-Covid numbers. “The performance of Indian hotels is aligned with that of some Western countries and Australia. The year 2023 looks like a solid benchmark year for Indian hotels. The Indian market truly stands out for its success. It is not confined to a few markets, nor to any one asset class. It was different from many others. The only comparable market in this regard is Indonesia,”
However, he believes the “missing pieces” in the Indian context are the short booking window and the lack of a new supply pipeline. “All growing markets need new supply as they grow. India has the biggest growing middle class and they are making more money and they also want to travel. They need a good product to stay,” he said.