With one-third of the world’s population having been asked to stay indoors, the hospitality industry is facing a crisis of not having someone to be hospitable to. As tourists cancel their travel plans and businesses start working from home, travel for business or leisure have both severely taken a hit, affecting revenues of marquee hospitality companies. “There are probably some problems or disruptions in the coming few weeks for the hospitality sector or till we get a handle on this situation,” Sanjeev Bhasin, DIrector, IIFL Securities told Financial Express Online. Bhasin is of the view that a relief package by the government is in the making for troubled sectors.
The no travel policy being practiced by people across the world, is not only affecting hotels but airlines as well with flights being cancelled globally. Making it a double whammy for catering businesses of hospitality companies like EIH Limited. However, Bhasin is eyeing the valuations of these brands. “They are trading at good valuations and that is for the whole market. This is a once in a lifetime opportunity to buy good brands in hotels,” Bhasin added. He is pinning hopes on the relief package to involve hospitality companies as well.
Since the beginning of the year, the Oberoi Group’s EIHLimited has seen share price tank by over 50 per cent; Lemon Tree Hotels is down by 62 per cent; Tata Group’s hospitality brand Indian Hotels has seen share price fall by 43 per cent while the TajGVK brand has seen a fall of 37 per cent.
However, contrary to Bhasin’s views are that of Vinod Nair, Research Head, Geojit Financial Services, who thinks that the time might not be right to buy hospitality stocks. Although Nair too is hopeful that a relief package is coming for troubled sectors, he is looking at how people react post the Coronavirus outbreak. “Maybe impact could remain longer even after we take control of the situation because of the fear that people will have of travelling too far away from their place,” Nair told Financial Express Online. He added that the problem could get extended which keeps the outlook to a negative for this year.
ICICI Securities, is expecting a significant drop in revenues of hospitality companies owing to lower occupancy. Listing out particular stocks to be affected, ICICI Securities is only advising investors to buy EIH Limited and none of the other big hospitality names. Lemon Tree’s, according to the brokerage sits on a significant debt and distrumption in tourism could affect the balance sheet. Meanwhile Indian Hotels is bound to take a hit globally, said ICICI Securities.