Hotel industry gasping for breath
Tourist arrivals rose in 2012, but rooms increased even more, forcing hotels to cut tariffs. Anupama Airy and Mahua Venkatesh write.business Updated: Mar 25, 2013 04:11 IST
Planning a holiday? You may well bag a room in a five-star hotel that cost Rs 7,000 a year ago, for Rs 5,600 now.
India’s hospitality industry saw a 15%-20% drop in tariffs in 2012 due to the global economic slowdown and an expansion in supply, hammered down further by an increase in air fares.
The net income for hotels in the country dipped by 3.1% in the year, even though the topline improved by 7% over the previous year, on account of increased overhead costs and high borrowing costs.
“The year 2012 was certainly uniquely challenging, with our industry having to contend with the adverse impact of sluggish growth in the Indian economy, a tepid economic recovery in the US and the financial crisis in the euro zone,” said MD Kapoor, secretary general, Federation of Hotel and Restaurant Association of India. Occupancy levels, however, remained unaffected at about 60%, industry experts said.
“While occupancy level has not been very badly off, the room rates have dropped,” said Jyotsna Suri, chairperson and MD, Lalit Suri Hospitality Group, adding that operational costs have gone up due to inflation and interest rates.
The hotel industry dropped tariffs despite foreign tourist arrivals in India during 2012 rising by 5.4% to 6.64 million compared to 6.3 million in 2011. Foreign exchange earnings in 2012 were $17.74 billion — an increase of 7.1% over 2011.
The dampener, perhaps, came in the form of fresh supply significantly outpacing incremental demand.
“Supply has expanded significantly in 2012 and this has somewhat impacted tariffs. Due to the increase in air fare, tourists have also resorted to cutting down on their duration of stay to suit their travel budget," said Rahul Pandit, CEO, Lemon Tree Hotels.
The ministry of tourism, meanwhile, is hoping that foreign tourist arrivals in India would double to 12 million within the 12th five-year plan period. This would need an additional 1,80,000 hotel rooms, according to Kapoor.