The rating agency ICRA refrained from downgrading its negative outlook for the Indian hotel sector for the fiscal year ended in March 2022, even as the development of Omicron’s situation had “dampened feelings” .
Hotel owners were likely to see an increase in cancellations after the surge in infections, prompting several states to announce partial closures. But a better-than-expected third quarter, which ended on Dec.31 (Q3), could make up for the coming quarter, according to the ICRA.
In its latest industry report, released Thursday, the firm noted: “There is no revision to CIFAR’s earlier expectations for FY2022 (FY2021-2022) at this time, due to a strong Q3 for fiscal year 2022. However, the situation is changing and there could be a downward bias in our estimates in the event of prolonged confinement, ”adds the report.
Quarter that saw a rapid recovery
Activity in the October-December quarter recovered at a sustained pace thanks to the easing of restrictions, pent-up demand and a rapid vaccination campaign. Demand emerged from stays, weddings, trips to car-accessible leisure destinations, and special purpose groups.
“Until the end of last month, there was only some reduction in discretionary business travel. Leisure travel remained largely unchanged in December and no major cancellations were noted, ”the report notes.
Business travel has picked up, mostly to project sites and manufacturing sites in specific industries, although it is still lower than pre-Covid levels.
Healthy income expected
The current quarter ended March 31 would see a drop in demand, at least in January due to the further increase in Covid cases.
“Despite the potential impact of Omicron, we expect healthy year-over-year (year-over-year) revenue growth for the hospitality industry in FY2022, supported by demand from both the second and second. third quarters, closing at 50-55% of pre-Covid revenue for the entire year, ”said Vinutaa S, assistant vice president and area head at ICRA.
“Hotels are likely to report pre-Covid margins at 85-90% of revenue going forward,” Vinutaa added.
Around 52% of ICRA’s ratings on companies in the sector are currently negative and 27 companies have been downgraded since the start of the pandemic.
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