DELHI: As a result of state-imposed restrictions, rising Omicron cases will likely impact the hotel and aviation industries the most, as several hoteliers have reported cancellations for January 2022, and daily passenger traffic on airlines has also decreased in recent weeks.
Previous waves indicate that as COVID cases rise, mobility restrictions increase, affecting economic activity.
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« Economic activity is likely to be impacted in Q4FY22 due to state-imposed COVID restrictions (night curfews, restaurants allowed at 50% capacity, offices allowed at 50% capacity), » say HDFC Bank economists. The downside risks now are more states imposing restrictions that extend beyond January 2022, and a global slowdown that will weigh on exports, they said in a note.
Until December 2021, the ICRA predicts strong demand for travel and only modest declines in discretionary business travel. Until December, leisure travel was largely unaffected. The third quarter of FY 21-22 exceeded the agency’s expectations.
“Several states have imposed partial lockdowns due to the Omicron variant’s rapid spread. This will limit travel in the coming weeks. We are seeing cancellations and fewer hotel inquiries. Vinutaa S, ICRA’s Assistant Vice President and Sector Head, said a month of total lockdown would reduce occupancy by 4%.
Booking cancellations for Christmas and New Year, weddings, and other events have cost the hospitality industry around Rs 200 crore, according to the Federation of Hotel & Restaurant Associations of India (FHRAI).
“From December 25th, rates and occupancies in city hotels have plummeted to pandemic levels of 10% to 15%,” said FHRAI Joint Honorary Secretary Pradeep Shetty.
The third quarter of FY2022 exceeded ICRA’s expectations. Leisure destinations like Goa and Jaipur saw healthy occupancy, with Goa recently surpassing pre-Covid levels. Since August 2021, Mumbai and Delhi have had over 60% occupancy, while Pune and Bangalore have lagged. However, with the Omicron variant, ICRA expects a slower Q4 FY2022.
As a result of the strong third-quarter demand and the potential for prolonged lockdowns, ICRA says it is not revising its FY 21-22 expectations.”
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As a result of the healthy festive season travel, ICRA’s sample reported a 117 percent sequential revenue increase in Q2 FY2022. Operating margins should improve sequentially in Q3 FY2022, thanks to improved operating leverage. However, Q4 FY2022 financial performance is linked to the current Covid wave and lockdowns “Vinutaa S. Pre-Covid levels are still a quarter away.
Several countries and states have imposed flight and border restrictions to control the spread of the Omicron variant.
From November 21 to January 5, daily domestic air passenger traffic fell below 3 lakh for the first time since November 21. From December 1 to 20, over 3.60 lakh passengers per day.
“Domestic industry capacity is currently 93 percent of pre-Covid 3,000 departures/day. A third wave of Covid poses a high risk of traffic disruption “Ashish Shah, Centrum Broking research analyst
IndiGo has already halted most flights between Delhi, Mumbai, and Kolkata, Durgapur, and Bagdogra for three months. The announcement came after the West Bengal government restricted flights to Kolkata from Delhi and Mumbai to three times a week starting January 5.
Omicron variant found in Hong Kong banned flights from eight countries, including India.
According to Suprio Banerjee, Vice President & Sector Head, ICRA, “Without scheduled international operations and a slow recovery in domestic passenger traffic, the Indian aviation industry will report a net loss of Rs 250-260 billion in FY2022.
The Omicron variant of Coronavirus is expected to reduce the GDP by 0.40 percent in March 2021-22 and 0.10 percent in the current fiscal due to restrictions on market and market complex capacity, as well as night and weekend curfews to limit human mobility/contact.
The recent increase in cases will have a negative impact on the fourth-quarter GDP, which will grow at a rate of 5.7 per cent, down from the earlier estimate of 6.1 per cent. The GDP is expected to grow 9.3% in 2021-22, which is 0.10 percentage points slower than previously estimated.
However, ASSOCHAM, a trade and advocacy group, says India Inc is better prepared to survive. “The current severity of Omicron has helped governments and industry remain confident in India’s ability to come out of the pandemic phase with minimal economic impact “Deepak Sood, ASSOCHAM Secretary General, said.
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On Thursday, India added over 116,000 new Covid-19 cases, the most since June 5, 2021. Daily cases have increased tenfold in just ten days, a speed not seen in the two years of the pandemic. Maharashtra, West Bengal, and Delhi have the most cases.