Covid’s Not Spoiling this NY Eve Bash

Rising Cases Not Deterring NYE Celebrations and Extended Operating Hours Benefiting Hotels and Restaurants in Major Indian Cities

Analysis for a Layman

The article discusses how the increasing number of COVID-19 cases in India is not expected to restrict New Year’s Eve celebrations this year. Hotels, restaurants, and bars have not been subjected to crowd control restrictions or caps on December 31 gatherings so far.

In major cities like Mumbai, Bengaluru, and Kolkata, establishments have been granted extensions on their usual operating hours. For example, in Mumbai, food and beverage outlets can stay open until 5 am on New Year’s Eve, while bars and pubs in Bengaluru can operate until 1 am. There are no numerical limits imposed on party attendance.

The hotel and restaurant industry is optimistic about its revenue prospects for New Year’s Eve. Advanced bookings are strong, especially at resort destinations. Although industry associations have provided safety guidelines, COVID-19 does not seem to be dampening enthusiasm for celebrations.

Covid’s Not Spoiling this NY Eve Bash

Impact on Retail Investors

The updated guidance on COVID-19 restrictions and extended operating hours is a positive development for stocks related to hotels, restaurants, bars, and the leisure/hospitality sector. With no restrictions on New Year’s Eve gatherings, demand and revenue potential are boosted. Investors can expect positive results and commentary from related companies at the beginning of 2023.

However, extended operating hours also mean higher labor, utility, and other variable costs, which could dilute margins. Investors should keep an eye on expense ratio guidance along with top-line trends. Additionally, the lack of COVID-19 caution could potentially lead to another wave of infections in early 2023, which would dampen sentiment.

Overall, the removal of limitations is a positive development for retail investors, who may consider building positions in quality leisure stocks during periods of weakness. Favorable New Year’s Eve trading could provide an upside catalyst.

Impact on Industries

The hospitality industry, including hotels, resorts, restaurants, bars, and pubs, is the most direct beneficiary of the eased restrictions. Well-positioned companies in this sector include Indian Hotels Co. (Taj), EIH Ltd (Oberoi), Specialty Restaurants, and Barbeque-Nation Hospitality.

However, the higher costs associated with extended operating hours may limit margin gains, so investors should closely monitor expense management.

Food and beverage manufacturers supplying these establishments will also benefit from increased demand. Key players like United Breweries, Radico Khaitan (alcohol), and Britannia, Varun Beverages (snacks/soft drinks) may see higher order flows.

Entertainment and event management companies will experience increased business with no limitations on gatherings. Companies like Wonderla Holidays, which organizes New Year bashes, and Inox Leisure, a film exhibition company, can expect better traction.

On the flip side, COVID-19 diagnostic facilities and pharmaceutical firms may see a resurgence in orders if the relaxed guidelines lead to a significant increase in cases.

Long Term Benefits & Negatives

If India can maintain this confident stance despite rising COVID-19 infections, it signals a broader shift in the pandemic mindset and business confidence. The expectation of no limitations, even during peak event days, indicates that authorities are now comfortable with accepting case increases without causing economic disruption.

For hotels, restaurants, and the leisure industry, this provides assurance that future waves may not result in strict lockdowns. It allows for longer-term planning and investments, rather than reactive contingency preparations. This structural improvement in demand predictability benefits expansion, job creation, and economic momentum.

However, the lack of caution raises public health concerns. India still has significant ground to cover in terms of vaccination. A sharp increase in severe cases and mortality among vulnerable demographics would be damaging beyond economic considerations and could lead to eventual restrictions being reimposed.

Uneven case trends create volatility risk for investors. Stocks may rally strongly in the near-term due to demand optimism but could correct sharply if growth normalizes.

Short Term Benefits & Negatives

In the short term, the clear positive is increased volume and sales traction for hospitality businesses around the New Year period. Q4 results in April/May 2023 will reflect this demand uptick compared to last year when omicron-related restrictions were intensifying.

However, extended operating hours may put pressure on cost ratios in the interim, so investors should monitor margin trends alongside revenue growth. Banking and lending stocks may also benefit from improved cash flows in the hospitality sector, potentially leading to faster debt servicing and credit growth.

On the downside, there could be a demand slump after the New Year peak, especially if infections spike after the celebrations. Early 2023 may witness some pullback in hospitality stocks before stabilization. Medicare companies specializing in diagnostics and pharmaceuticals may also face challenges if expectations of renewed demand do not materialize into orders. Near-term stock corrections could provide better entry opportunities in this sector.

Impact on Companies from New Year’s Eve Celebrations

Indian Companies Likely to Gain:

  1. Hotel & Restaurant Chains:

    • Indian Hotels Company (Taj): Increased bookings and higher revenue from New Year’s Eve events, especially in resort locations.
    • Oberoi Hotels & Resorts: Strong demand for luxury accommodations and dining experiences.
    • Delta Corp Ltd (Deltas): Increased footfall and higher spending in their casino hotels and restaurants.
    • Jubilant FoodWorks Ltd (Jubilant Foodworks): Higher sales in Domino’s Pizza and other restaurant chains due to increased party orders.
    • Radisson Hotels India: Boosted occupancy rates and festive season price premiums.
  2. Event Management Companies:

    • Event & Entertainment Management Ltd (EEML): Increased demand for event planning and execution for New Year’s Eve parties.
    • Wizcraft International Entertainment Pvt. Ltd: Potential contracts for managing large-scale celebrations and shows.
  3. Alcohol & Beverage Companies:

    • United Breweries Ltd (UBL): Higher demand for beer and other alcoholic beverages during celebrations.
    • Radico Khaitan Ltd: Increased sales of whiskey and other premium spirits.

Indian Companies Potentially Impacted:

  1. Online Food Delivery Platforms:

    • Zomato Ltd (Zomato): Potentially lower order volumes as people dine out more for New Year’s Eve celebrations.
    • Swiggy: Similar impact as Zomato, with increased focus on late-night deliveries.
  2. Healthcare Providers:

    • Apollo Hospitals Enterprise Ltd (Apollo Hospitals): Potential increase in hospital visits due to alcohol-related incidents or Covid cases post-celebrations.
    • Max Healthcare Institute Ltd (Max Healthcare): Similar potential for increased hospital visits.

Global Companies Likely to Gain:

  1. Luxury Brands:

    • LVMH Moët Hennessy Louis Vuitton SE: Increased spending on luxury goods for New Year’s Eve parties and gifting.
    • Kering SA: Potential boost in sales of fashion items and accessories for celebrations.
  2. Travel & Tourism Companies:

    • Booking Holdings Inc.: Increased hotel and flight bookings for travel to India during the festive season.
    • Expedia Group Inc.: Similar potential for increased travel bookings through their platforms.

Global Companies Potentially Impacted:

  1. Streaming Services:
    • Netflix Inc.: Potential decrease in viewership as people spend more time attending New Year’s Eve events and socializing.
    • Amazon Prime Video: Similar potential impact on viewership.

Market Sentiment:

  • The news is likely to positively impact the hospitality and leisure sector in India, with hotel chains, restaurants, and event management companies seeing a boost in share prices.
  • Liquor companies may also benefit from increased demand, while online food delivery platforms could see a slight dip.
  • Healthcare providers might see a small increase in share price due to potential post-celebration hospital visits, but this is unlikely to be significant.
  • Global luxury brands and travel companies could see a positive sentiment boost, while streaming services might experience a temporary decline in viewership-related metrics.

Note: This analysis is based on the information provided in the news article and current market trends. It is important to consider other factors and conduct further research before making any investment decisions.

Proper Citation: ET Bureau. (2023, December 28). Covid’s Not Spoiling this NY Eve Bash.

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