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hospitality | IST

Resorts are running full; expect surge in travel to be sustainable: Mahindra Holidays

As COVID restrictions across the country eased, holiday destinations have seen a surge in visitors and holiday properties are running at high occupancy levels. Resorts say there has been nearly roughly a 75 percent improvement in occupancy.

As India recovers from COVID and restrictions across the country are eased, holiday destinations have seen a surge in visitors and holiday properties are running at high occupancy levels.
To understand the current situation and the road to recovery for the hotels business, one of the worst-hit sectors by the pandemic, CNBC-TV18 spoke to Kavinder Singh, MD & CEO of Mahindra Holidays, and Patanjali Keswani, Chairman & managing director of Lemon Tree Hotels.
On Mahindra Holidays, Singh said, “Our resorts are running full and I don't see this as just revenge travel. Because if you really look at it, the leisure part of the travel anyway started to recover even in January, February and March. So it wasn't just that people were wanting to come out, of course, that is a core, let us say desire. But the culture to get out of homes, to be with the family, to be in open spaces, is something that is an after-effect of the pandemic, that is going to last a long time and more importantly, drivable destinations is where we are seeing a very, very good pickup.”
He added, “If you look at the occupancies, in July and August, we hit about 73 percent and that is not the occupancy that you see in this period of time. One of the other patterns that we are noticing is that the seasonality that which used to be big in the earlier times prior to pandemic times, is something that is I think there would be really no seasons, every season is a holiday season, because people are able to work from our resorts, children are able to write exams. So the idea that I would holiday only in a particular season on a particular period is I think, sort of now being turned on its head.”
On demand for the hotel industry, Keswani said, “So there has been roughly a 75 percent improvement in occupancy, which means we are obviously north of 50 percent and there has been also a close to 30 percent improvement in pricing. So in the hotel business, our pricing is dynamic, only about 20 percent is fixed. So the other 80 percent has seen an improvement in price by about 40 percent and that is fundamentally because demand has picked up so it is just clearly demand and supply. So there is an enormous improvement and it is a week-on-week improvement.”
“So if I look at June and then I compare it to July and then to August and now to September, then literally every day, every week there is a 5- 7 percent improvement in demand. I don't see that third wave really now other than of course Kerala and Maharashtra really affecting the hotel industry. So I see fundamentally the Q2 will be more than H1 last year and double of Q1. Q3 will be 50 percent better than that and Q4 will be close to normal. So that is broadly what we are seeing in our demand projections.”
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On net EBITDA, Keswani said, “Net EBITDA, even last year we were close to I think 70-75 crores of net EBITDA. So clearly this year, we will do better than that. In our business, there is a very significant amount of depreciation, which is really cash profit for us. So we break even at I think 1.50- 1.7 crore a day and pre COVID already our run rate was 2.5 to 2.7 crore so I am seeing a very positive H2.”
On cost, Singh said, “If I were to look at the cost part, there is a significant improvement in the resort operating costs, which is permanent in nature, as well as in the cost of acquisition. For us cost of acquisition for the members also is an important cost and we have been able to bring down the fixed costs on a very sustained basis."
"You can see that from our margins as you can see our margins even in quarter one improved over the quarter one of last year. Even if you look at our trajectory over the last five years, we have been improving our margins by 100 basis points year-on-year.”
For full management commentary, watch the video.