With travelling almost at a complete halt, the hotel industry is amongst the most critical victims of the virus. McKinsey predicts that it may be 2023 by the time the industry can start functioning at pre-COVID levels. Today, high vacancy levels plague hotels across the globe—barring the designated quarantine centers. The Indian industry is no exception, the revenue per available room has declined by almost 50%, with the revenue contraction expected to persist to 90% within this year. Returning to any kind of normal for most hotels remains contingent on the advent of a cure or vaccine, both expected further down the horizon.
It is interesting to note, however, that not all accommodation is expected to suffer the same fate. Larger hotels face greater challenges as they may no longer be able to provide the several luxury services—exclusive gyms, mini-bars, central air-conditioning, butler services, in-house massages etc.—that earlier set them apart. In fact, their sheer size may be seen as a disadvantage by several travelers who wish to steer clear of crowds. Instead, smaller bed & breakfasts, boutique hotels and homestays (the kind offered by Airbnb) may become more attractive. These units are usually isolated or only have the capacity to host ten guests at a time. Moreover, the lack of common leisure spaces or centrally connected vents makes guests even more secure. Early evidence to support this may lie in the fact that smaller and economy hotels have had consistently higher occupation rates than larger chains, which bear significantly higher fixed and operating costs. Moreover, people who are looking to get out of their homes, but not onto a plane are resorting to home-stays and short-term rentals.
Despite this glimmer of hope for the future, Airbnb is definitely suffering in the present. It had to reduce its workforce by 25%, take on more debt, and its valuation felt to half its 2017 value. One thing is for sure—the longer the pandemic persists, the more these businesses will bleed, because unlike restaurants, there aren’t too many alternative services they can offer.
