Jones Lang LaSalle Incorporated (JLL) reveals that the hospitality sector recovers in the last quarter of 2020 with a rise of 35 per cent in the occupancy rate.

The hospitality sector has witnessed a recovery in room night demand in the fourth quarter of 2020 compared to the previous quarters of the year. Occupancy levels, which had dropped due to lockdown enforced in March 2020, crossed 35 per cent sector-wide in November 2020 (as per STR data), which is the highest recorded level since lockdown.

This revival is credited to the leisure ‘revenge travel’ that picked pace during weekends and the festival season. Along with that, weddings, food, and beverage demand are also amongst the contributing factors.

“Domestic business travel is expected to pick-up pace from March-April 21 onwards, as employees return to workplaces and travel advisories by companies are softened. Additionally, domestic leisure will continue to drive occupancies across the country. F&B demand will continue to grow as eating out will increase albeit cautiously,” said Jaideep Dang, Managing Director, Hotels and Hospitality Group, South Asia, JLL. 

Goa witnessed considerable growth in recent months, with an occupancy level of almost 55 per cent on November 20. Luxury and upper-upscale hotels in Goa maintained a healthy occupancy level in November 2020 with levels ranging between 60 per cent and 70 per cent compared to occupancy levels in Nov’19 that ranged between 65 per cent and 75 per cent

Hotel investments revive

With two large transactions amounting to Rs.547 crores, hotel investments witnessed a positive sign in 2020. Despite the break-in investment activity since March 2020, the rising indications of re-valuations, a slow demand revival, improvised cost structures, and reduced profit levels are evident for the next two years. 

Serious investors are prioritising debt service ratios, operating costs, and suppressed demand from corporate travel, conventions, conferences, and exhibition business. Moreover, travel restrictions are preventing site inspections and providing unclear future revenue streams. These conditions have increased the timelines of investment sales. Investors are primarily evaluating operational assets in key markets rather than Greenfield developments. This trend is evident all over India. Investors will take strong investment decisions as the performance cycle picks up. Additionally, fear of missing out on attractive deals may boost the investments.

 A positive vision for 2021

 Domestic travel is expected to pick up the pace from March or April 2021. This is credited to the increasing number of employees returning to workplaces. Also, relaxed travel advisories by companies will have an impact on the same. 

Furthermore, F&B demand will increase as eating out will gradually be the norm. Large restaurants in hotels with all necessary health and hygiene protocols could benefit from the rising demand. Weddings ceremonies will add seasonal momentum to the hospitality sector. Furthermore, repurposing brownfield hotel assets for other operations like co-living, senior living, and student housing facilities may occur.