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Hotels may feel shivers in hottest business season

02:33 AM Feb 11, 2020 |

Mumbai: The Indian hotel industry must brace itself for a raft of cancellations and fall in occupancy levels as leisure and business clients cancel or defer travel plans due to spread of novel coronavirus.

The threat couldn't have come at a worse time for the Indian hospitality industry.

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Recovering from years of subdued room rates and low occupancy levels, hotels in India started to hike prices in early 2018 and add capacity aggressively as discretionary spending picked up pace and tourism across the globe flourished. However, the slowdown in global economic growth and fall in domestic consumption over the past year has limited their ability to further raise prices and maintain occupancy levels at over 65%.

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Now, hotels in India may have a bigger issue at hand. The coronavirus' spread is expected to bring down foreign tourists in the country, a crucial segment for premium hotels as they account for around 60-70% of their business, market experts said.

"We are seeing cancellations from overseas customers who had planned holidays, but not so much from business clients," said the head of sales for western India at a prominent hotel chain. "While the situation is risky, I think it may be too soon to panic."

Analysts have already started to sound the alarm, fearing that most premium hotels could be staring at a sharp fall in occupancy levels in the March quarter, typically the strongest quarter for the industry.

There's an aversion to travel to Asia, be it for business or leisure, and that can hit the industry hard, said Germany-based Gabriel Peter, sales manager for Asian clients at data portal agency Statista. Peter and his team have already postponed travel to India from March to July. According to Statista data, February is a vital month for the Indian hotel industry as it attracts the maximum number of foreign tourists.

Expecting a disruption in the tourism sector due to the spread of coronavirus, brokerage house ICICIdirect.com has downgraded its rating on shares of both Indian Hotels Co Ltd and Oriental Hotels Ltd to 'hold' from 'buy'.

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