Sep 19, 07 | 1:58 am
By Vishakha Talreja
It’s not all hunky-dory for the hotel segment. Blame it on high room rates, the occupancies of branded hotels (three to five star) in metros are showing a downward trend.
After Bangalore and Hyderabad, it’s Delhi where occupancies have dipped by 6-7% in the first five months of this fiscal (April to August) compared to the corresponding period last year, according to management consultancy Ernst & Young India. But importantly, average room rates (ARR) across metros have not yet fallen with dipping occupancies.
In past year, except for Crowne Plaza’s 234-rooms in Capital’s satellite township Gurgaon, no new star hotel has come up in the national capital region (NCR). “Occupancies in Delhi have dipped and revenue per room (RevPAR) has been stagnant, even though there has been no substantial increase in supply this year. In the next two years, as new supply comes in, the occupancies will further dip,” says Peter Leitgeb, CEO, The Claridges Hotel & Resorts. Around 2,720 hotel rooms will be added in NCR in 2008, with players like The Leela and Oberoi’s opening their new hotels, again in Gurgaon.
High room rates have led to a shift in travel patterns, and that perhaps explains part of this occupancy dip. “Many corporate travellers now opt for same-day travel. On one hand room rates are high on the other the air connectivity has improved,” says Mona Chhabra, associate director, Ernst & Young.
In metros with big demand for star hotel rooms (Bangalore, Delhi, Mumbai, Chennai, Hyderabad and Pune) average room rates had jumped around three-fold in last three years. Occupancies have dampened in Bangalore, Hyderabad and Delhi also as many travellers are opting for stand alone un-branded properties. “
Owing to skyrocketing room rates a parallel market consisting of serviced apartments and guest houses has emerged. Many companies have started picking up apartments in Gurgaon, Noida and Bangalore on monthly rental basis to save on hotel costs,” says Saurabh Gupta, senior associate, HVS International, a hotel consultancy.
But with busy travel season ahead, with international businessmen flocking to India during September to February, hoteliers are positive that revenues and occupancies will pick up. “There are many international and domestic conferences this busy season. Next three-four years are quite good for the industry,” says a Le-Meridien official.
As the demand-supply mismatch still exists, the outlook for the industry still remains upbeat according to industry analysts. India has around 1,10,000 hotel rooms in the branded category. Room rates will correct (read dip) as new supply comes in. Bangalore will add 2,216 hotel rooms, Hyderabad 1,633 and Mumbai 860 rooms, besides NCR’s 2,720 in 2008.
