Domestic travel is back, as are premium prices at hotels

With COVID numbers in check for three months now, and travel resuming across key Indian cities, the hospitality business is getting back to where it was before the pandemic began. Since the New Year though, a third wave notwithstanding, the turnaround in Indian hospitality has been phenomenal. Hotels say their revenues are up as are occupancy rates across properties.

"Restaurants have opened, but the demand for takeaway has not diminished. So, these are the kind of things that have helped us take our total RevPAR up," said Zubin Songadwala, area manager (South), ITC Hotels, and general manager of the iconic ITC Grand Chola in Chennai, "As banquets have opened, as restrictions have been lifted, we have seen banquet revenues going up. It gives us the benefit of a total fillip in total RevPAR."

RevPAR or Revenue Per Available Room is a hotel’s earnings divided by the number of rooms on the property and serves as an indicator of the health of a hotel’s business. While traditionally, RevPAR has served as a function of how occupied a hotel is, a recent and significant spike in dining, banqueting and alternate revenue streams at various hotels — this includes home deliveries and sale of merchandise — has pushed this number up.

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However, it isn't just RevPAR that’s on the rise. From occupancy levels to average daily room rents, hotels across India have seen a noticeable spike in most key parameters. A recent study by JLL indicated that occupancy rates have seen a noticeable year-on-year spike across key hospitality markets in India between January and March, with Mumbai’s 10.8 percent spike leading the way. However, the bigger takeaway is that revenues per available room or Rev-par have seen a whopping 71.5 percent increase in Mumbai, while Delhi has seen a 44.3 percent in average daily room rents in the same period. These numbers come just as leisure, domestic travel has recently spiked.

According to online travel agencies, "revenge travel" has been the order of the day at destinations like Jammu & Kashmir, Rajasthan, the Andaman Islands, Shimla, Meghalaya, and Sikkim. Experts say hotels here have beaten their 2019 occupancy and room rates even as they remain sold out for the most part of the year.

"Destinations like Gulmarg and Havelock, and places where only a bunch of eight to ten hotels exist are seeing 80 to 90 percent of their being sold out at least 45 days in advance, which was not the case before," said Hari Ganapathy, co-founder, PickYourTrail, "In fact, at one point Kashmir was undoable, because Gulmarg, one of its highlights, saw its key properties sold out till May-end."

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It comes as no surprise then that hotels are keen on making hay while the sun shines. A quick survey of several luxury hotels in South India has indicated that multiple promotions, including discount packages and offer bundles, have been done away with, with the focus back on premium experiences at equally premium prices.

"It is conservative to say that you would have at least 20 percent growth in room rates. A lot of these hotels come into their RFP (Request for Proposition) business in September and October, which is a great indication of what the market is like, which in turn plays the decisive role in fixing prices," said Jaideep Dang, managing director (Hotels & Hospitality), JLL India, "I can tell you a lot of these hotels have already started becoming very conscious in rolling out room rates for corporates because they understand that pent-up demand is so strong."

The question remains: is this the start of a sellers' market in post-pandemic hospitality? Only time — and daily room rents — will answer that question. Until then, hotels are making merry thanks to largely sold-out rooms, premium-priced experiences and a good mark-up on room rates.

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