Coming out of the impact of the COVID-19 pandemic, the travel industry is seeing a recovery in demand despite inflationary pressure. While there are concerns around the spike in inflation, and rise in jet fuel price, which is resulting in increased airfares, the demand for travel has not been impacted, with hotels reporting pre-COVID occupancy levels and travellers increasing their spending.
The cost of travelling has risen but it is the pent-up demand that is fuelling the industry's growth in India, say travel companies and hoteliers.
"Yes, there are recessionary pressures, but the India story is strong. Summer months have been strong for all hotels and our total bookings have crossed pre-COVID levels. Even July to December forward bookings are strong. In fact, for our Mussoorie hotel, which is a Ramada, people are requesting to book rooms as demand is high. This hotel is retailing at Rs 25,000. So, (we are) seeing no slowdown in this calendar year," said Nikhil Sharma, Regional Director for Eurasia, Wyndham Hotels and Resorts.
Uptick in room rates, occupancy
He added that hotel rooms with an average daily rate (ADR) of Rs 6,000-7,000 in 2019, are now retailing at Rs 17,000-18,000.
"During the peak summer season, there was a surge of 40-100 percent in room tariffs for favourite leisure destinations compared to pre-pandemic levels," said Daniel D’Souza, President & Country Head - Holidays, SOTC Travel.
In May this year, hotels in India recorded ADR in the range of Rs 5,750-5,950, 6-8 percent up compared to the same period in 2019, according to insights by real estate services company Anarock and consulting firm HVS.
In addition, revenue per available room (RevPAR) in May was Rs 3622-3,867, 10-12 percent higher than the pre-COVID level. RevPAR is calculated by multiplying a hotel’s ADR by its occupancy rate. The occupancy rate, which stood at 63-65 percent in May this year, was up 1-3 percentage points versus the pre-pandemic level.
A popular destination like Char Dham which had static room rates pre-COVID, is now seeing dynamic pricing. "Currently, the pricing is as per demand which is high. In 2019, hotel rooms which were available for Rs 3,000-3,500 now cost over Rs 5,000," said an official of a travel company.
There is an increase in the hotel fares but there is no dip in occupancies in hotels, said Rikant Pittie, Co-Founder, EaseMyTrip. "Plus, there is an increase in bookings for 4- and 5-star properties where there is a greater set of emphasis on safety and sanitisation," he added.
Star hotels are drawing in large numbers of people. In terms of pricing, the budget and mid-segment properties are keeping it dynamic to manage their occupancy, said Nitin George, Group Partner, Rainforest & Talisman Property Management.
SOTC's D’Souza pointed out that they are seeing a significant uptick in premium and affordable luxury properties like The Khyber Himalayan Resort & Spa in Gulmarg, Qayaam Gah in Srinagar, Evolve Back in Kabini and Coorg, and Welcom Heritage Urvashi's Retreat in Manali, among others.
Even Rajeev Kale - President & Country Head, Holidays, MICE, Visa - Thomas Cook (India) Limited, said that they are receiving queries across value, affordable luxury and premium properties such as The Orchid in Shimla, The Grand Dragon in Ladakh, and The Leela in Goa, among others.
Strong demand
Kale also said that due to the strong pent-up demand and with customers being unable to take a holiday for over two years, people are willing to spend more on travel. "Our data indicates that despite higher tariffs and supply constraints, customers are willing to increase their travel spending by around 20 percent," he said.
Bookings in India saw a 178 percent year-on-year growth in May 2022 despite increase in travel costs, noted a recent report by travel technology company RateGain.
"The demand for travel continues to stay strong even in the face of high inflation. While there is a global recession anticipated due to many reasons, we have not witnessed any impact or drop in the demand for bookings and queries," said Aditya Gupta, Senior Vice President, Hotels and Holidays, Yatra.com.
Due to the strong travel demand, D’Souza said that SOTC's domestic travel business has surpassed 2019 numbers. Indiver Rastogi, President & Group Head, Global Business Travel, Thomas Cook (India) & SOTC said that they are at over 90 percent of the pre-pandemic level for its business travel segment.
"Business travel is back. IT industry has opened up and a lot of people have adapted to the concept of staycations and weekend outing packages. I believe that in the festive season there will be a demand surge in the business hotels," said Wyndham's Sharma.
Kale noted that currently, they are witnessing a significant appetite for travel from segments like young professionals and couples. "Also, with schools having reopened in West and South India, the family segment is displaying demand for weekends and extended weekend getaways,” he added.
For hotels, Sharma said that one segment that is performing well is the wedding space. "Weddings are now happening in all types of formats and because hotels are more hygienic they are doing four-five weddings in a day. Also, because weddings are smaller, guests stay back (in hotels). While this was there earlier (pre-COVID), it got amplified in the last two years."
Recovery in travel modes
When it comes to travel modes, customers continue to prefer air travel despite rise in aviation turbine fuel (ATF) cost, said Rastogi.
"Airfares are at an all-time high right now due to rising jet fuel costs. For flights, average fares across popular routes have gone up by 30-35 percent in the last two months versus January 2022. Despite rising airfares, flights have seen an 83 percent recovery in domestic travel and 70 percent recovery in international travel," said a spokesperson of online travel firm Ixigo.
The spokesperson further said, "Airfares have increased and train availability has dropped from around 40 percent to 20 percent in the last few months. This has led to a segment of travellers opting for buses to meet their travel needs, which has resulted in higher recovery for the bus segment. This recover level currently stands at 85 percent of pre-pandemic levels."
Forecast
Now, the travel sector has its eyes on the upcoming festival season. "August has one of the biggest long weekends. So, travel search queries are set to increase for that time. Also, advance bookings are set to go up due to the upcoming festival season.”
Sharma estimates that leisure locations during the festival season this year will see much higher occupancy in hotels.
"Towards the festival season there will be a spike in recovery because flight capacity will go up due to new airline (launches), which will also increase competition and bring down rates (air fares),” said Porus Doctor, Partner and Consumer Industry leader, Deloitte Touche Tohmatsu India LLP.
However, he added that the Russia-Ukraine war which is impacting fuel cost will impact the travel industry especially international travel.
"We could see a potential slowdown due to the Russia-Ukraine war next year but currently there is no impact on the travel space. Don't see the Indian economy, at least in the tourism space, slowing down as there is lot of pent-sup demand," said Sharma.
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