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All of a sudden the world has become a changed place. There is hardly any society, industry or economy that hasn’t been affected by the pandemic. India’s hospitality industry is no exception. Last year, the industry went through a churning during the lockdown. Almost every hotel company in the country, without exception, either downsized, cut the salaries of its employees or both.
There are multiple rumours floating about hotels shutting down and on the block as distressed assets. What is the truth? This article is an attempt to put things in the correct perspective, keeping its focus on the structured and organised hotel industry of India only.
The unlock brought a wave of enthusiasm in India’s hospitality industry, and on the strength of domestic tourism and social events, the industry was slowly limping back to normalcy. The second wave broke the proverbial camel’s back. There is doubt and confusion everywhere. The future looks bleak.
Staycations
However,India’s vast market has been and will continue to be its biggest strength. With the inbound (international) market drying up completely, India’s hospitality industry quickly did a reboot and looked at its domestic market through a different lens.
A correction happened in the room rates. The focus for star hotels became the ADR (Average Daily Rate) which is calculated on the total inventory of rooms, instead of ARR (Average Room Rate), which is based on occupancy. This meant the bragging rights that luxury hotels enjoyed due to their high ARRs were thrown out of the window, egos were swallowed and very attractive rates were offered to domestic travellers to entice them to stay in a star hotel, often in their very own city! The idea of staycation began to gain roots. Suddenly, the same five- star hotel that was expensively out of reach, emerged as a very attractive weekend getaway.
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Just like the airline seats in the last row are available at the lowest price, hospitality properties in India too are offering their lowest rate for ROH (Run Of The House) rooms, typically in the least favourable location of the property. This means that a small percentage of the room inventory of hospitality properties is now being kept aside for attractive last minute discounts.
Staycation is now recognised as a market segment and will start featuring in the annual budgets of many hospitality properties in India, for a very long time. And they won’t necessarily offer this market segment their ROH rooms. In fact, I think many city hotels in India will compete with each other for the coming two years to get a slice of this market segment.
Offbeat Destinations & Homestays
Tired of being cooped up at home and wary of crowded hotels in conventional locations, more and more domestic travellers in India are now seeking and shall continue to seek offbeat locations. In fact, the more offbeat and remote the location, the better. This will continue to help revive markets for small boutique hotels and homestays, some of which are in the unstructured market (meaning, not part of a chain).
A classic case in the point is amã Stays & Trails, owned by IHCL (Taj Group), that was launched in 2019 and has seen a phenomenal growth in terms of properties from a few in 2019 to over 40 today! Take my home state Rajasthan where tourism till recently was mostly concentrated in the bigger cities of Jaipur, Jodhpur and Udaipur, followed by Ranthambore and Jaisalmer.
A significant segment of domestic travellers today are opting for offbeat locations like the mostly undiscovered Shekhawati region, that is as far from Delhi-NCR as Jaipur but never got its due share. This trend will continue and give a boost to tourism in not just Rajasthan but other neighbouring states as well.
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The Peculiarity of Our Micro Markets
India, as we all know, is a vast and diverse country. And our markets behave as differently as they are diverse. The general rule that worked in city hotels was to encourage staycations. However, almost every big city in India added a brand new market segment driven by the pandemic.
Chennai saw a huge surge in medical interns being brought in from other cities and housed in hotels to overcome the shortage of medical staff in hospitals. Mumbai being a port city benefitted from officers and staff of merchant navy being quarantined in star hotels, which led to some airport hotels seeing consistently over 75 percent occupancy!
Many Goa hotels saw entire film crews shifting their shooting locations to Goa with its vast open spaces. And mind you these hotels didn’t have the tag of ‘quarantine hotels’ that can scare off the domestic travellers looking for a staycation.
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