COVID-19 crisis | Hospitality players bank on property sales as grim outlook continues

With the hospitality industry in doldrums due to the COVID-19 pandemic, hotel and resort owners have reportedly turned to real estate consultants to sell properties over the past two months as future outlook for the sector continues to look grim.

Insiders told Mint that the situation was set to worsen as the Reserve Bank of India’s (RBI) six-month loan moratorium ends on August 31. Consultants say defaults could rocket as much as 50 percent of the sector’s total outstanding loans, after the moratorium period.

The sector has close to Rs 50,000 crore worth of outstanding loans attached, and revenues from occupancies at post of these have plunged more than 40 percent, according to consulting firm Hotelivate.

The properties for sale include assets valued between Rs 50 crore to Rs 500 crore each belonging to top domestic and international brands, industry officials told the paper.

“High overheads like accruing loan interest and fixed costs have made it untenable to continue running these properties,” they noted.

Moneycontrol could not independently verify the report.

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While investors are keeping a “cautious approach and seeking steep discounts on asking price”, Nandi Vardhan Jain, founder and CEO, Noesis Capital, said that transactions are cropping up across the country and have seen “good interest from high net worth individuals (HNIs) and institutions.”

Jain added that current transactions were far apart from traditional sales as some owners had greenlit deals on the basis of replacement costs alone.

“A marked departure from where hotels are valued on the basis of discounted cash flow method and direct-comparison approach with competitors," he added.

With the RBI deadline for loan moratorium nearing its end, the situation seems even grimmer. As per CARE Ratings, occupancy rates may pick up by 35 percent in Q3FY21 and bring the annual average to 25 percent – provided that travel bans are lifted and travel picks up once COVID-19 cases are under control.

However, not all are optimistic. A survey by JLL showed that only 20 percent of operators believed that revenues could reach 2019 levels within the next six to twelve months.