HVS ANAROCK lowdown on 2019 & forecast for 2020
Like every year, 2019 started on an optimistic note, but was that optimistim well placed? Have the predictions of steady growth made their investors happy? Mandeep S. Lamba, President (South Asia), HVS ANAROCK explains the scenario.
Due to the ongoing economic headwinds, we anticipate the sector to perform at similar levels of growth as in 2019”
How has 2019 been for Indian hospitality industry?
At the start of 2019, we were optimistic about the sector because of the strong performance witnessed in 2018 driven primarily by the increasing demand-supply gap. The first quarter of 2019 beat market expectations, and in the latter part of the year, the sector benefitted from easing of Goods & Services Tax (GST) rate on hotel room tariffs across the board. However, successive negative influences overshadowed the positivity in the sector.
The closure of Jet Airways resulted in a severe crunch in availability of airline seats, which combined with the impact of general elections in the country led to a temporary softening in demand growth. While multiple airlines quickly filled the void by increasing capacity, and the incumbent government returned to power with an impressive majority, the ongoing economic headwind resulted in Q2 & Q3 being negatively impacted and dampening the great start to the year. The closing months of the year have once again brought some cheer with November proving to be an absolute block buster for the industry with several performance records being broken. Overall the year will see a much slower growth than was anticipated and we are likely to close at a RevPar growth of circa 5 per cent on a pan India basis.
Your previous report has predicted- ‘Supply is anticipated to grow by 4 per cent and demand by 7 per cent. Has that been achieved?
Supply has grown as anticipated in 2019. Demand growth had softened temporarily before picking up towards the latter part of the year.
Which are the cities that have performed the best in terms of occupancy and ARRs? Which cities have witnessed a decline?
Most of the major cities have witnessed a growth in RevPAR, with Hyderabad recording the highest y-o-y growth as of year-to-date period ending October 2019, followed by Bengaluru and Gurgaon. In contrast Ahmedabad, Goa and Pune registered a decline in RevPAR during the same period. Mumbai continued to lead in terms of both occupancy and ARR for the same period and is the top performing market for 2019 followed by Delhi for the first ten months of 2019.
Also, does the prediction of ‘2020 being the year of highest occupancy’ still remain the same?
The industry is expected to perform at similar levels of growth witnessed in 2019, with ARR contributing more than occupancy. 2020 is not expected to be the year it was anticipated to be with the prevailing economic and political environment in the country.
What are your predictions for 2020?
Due to the ongoing economic headwinds, we anticipate the sector to perform at similar levels of growth as witnessed in 2019. The ongoing reform plan of the Government of India may help revive the economy in the second half of 2020.
According to you what remained challenging for the industry this year?
The closure of Jet Airways resulted in a severe crunch in availability of airline seats. This coupled with the impact of general elections and the global economic headwinds led to a temporary softening in demand growth.
By when should we able to meet the gap between demand and supply in the Indian hotel industry?
Hotel supply growth in India has been successively declining since 2012, with the current year being an exception to the long-term trend. Based on the projects currently under construction and in the pipeline combined with the ongoing economic uncertainty, HVS anticipates that the long-term trend of declining supply growth will continue to remain well into the first half of the next decade.