Cautious optimism the underlying tone in 2019; ADRs to go up, forecasts HVS-ANAROCK Report

2019 is expected to be a mixed bag for the hotel industry and Mandeep Lamba’s report suggests that cautious optimism will be the underlying tone in the election year.

The election season is expected to cause a temporary fall in corporate travel numbers, the mainstay of revenue for most hotels. Post elections, the report foresees numbers swelling up when there is more clarity on the policy-front.

Budget-hotel aggregators have emerged as significant players and are fast-expanding their consumer base, increasingly positioning themselves to compete with domestic mid-scale brands, targeting their clientele. They are benefitting from focussing on a largely untapped market and can no longer be ignored by mainstream and traditional players.

That demand will clearly outpace supply is another major prediction for 2019. The demand is expected to grow at 7 per cent while supply is predicted to grow at 4 per cent.

On the investment front, the success of Lemon Tree and Chalet Hotels in raising money through going public is likely to encourage other major players to take the IPO route. The trend may bring in additional investments into the sector.

The hotel industry’s expectations from 2019 are partly based on the successes of 2018. After many years, ADRs managed to beat inflation in 2018. While RevPAR is expected to grow at 9.5 per cent in 2019. The halcyon days of 2005-2008, however, are still distant. It may take 5 to 10 years, depending on the calculation based on INR or USD, for rates to reach the “boom-period levels.”

Distressed pricing of hotel assets is expected to boost transactional volume and high sale of hotel assets can also be anticipated.

Looking at a larger time-frame, 2020 may turn out to be the best year in this century for the hotel industry. A combination of a stable government and strong economic growth may produce the highest-ever occupancy levels in the past 20 years! Overtaking even the glory days of 2006. The outcome of elections may even considerably change the goal-post. It is ‘wait and watch’ for now.

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