Source : Business Times - 20 Oct 2008
AFTER a two-year bull run, Indian star-rated hotels are now feeling the pinch of a palpable slowdown. Room occupancies have plunged, corporate discounts have got bigger, restaurant footfalls have dropped while expansion plans have been put on hold.
According to HVS International, a global hospitality consulting firm, almost all the major Indian hotel markets - Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bangalore - have witnessed a sharp fall in occupancies with Delhi registering an 8 per cent dip during the April-September period this year over the same period last year.
Though tariffs have not yet been slashed - as most hotels are still assessing the inflationary market - they are offering corporate discounts and better deals to keep the clients hooked. In some cases, corporate discounts are as high as 40 to 50 per cent.
Says Neelabh Chugh, manager at Interncontinental The Grand in New Delhi: ‘Most companies have cut down on foreign and domestic travel due to market volatility. As a result, there’s an immediate visible drop in our business by about 20 to 25 per cent. Room occupancies and F&B (food and beverage) sales have both been hit.’
In fact F&B sales have been impacted by both - a downslide in room occupancies and lesser number of walk-in guests. Said Amit Chowdhury, executive chef at Taj Mahal Hotel in New Delhi: ‘Though it is tough to quantify, F&B revenues in star hotels have definitely taken a beating due to the slowdown.’
In addition, Mr Chowdhury says hotel guests have also become price sensitive lately and are steering clear of ordering expensive dishes and drinks.
What has further impacted the hospitality industry is the whittling down of travel by company executives who are now relying more on tele and videoconferencing to conduct business. Airfares too have been travelling north since last year. This has had a cascading effect on the hospitality sector too.
Says the CEO of a Delhi-based multinational company: ‘We’re advising our staff to stay put and defer travel plans unless there’s an emergency. In these times, spending on steep airfares and expensive hotel accommodation is not a smart idea.’
Indian hotels command top dollar rates and are one of the most highly-priced in the world. For instance, a standard five-star hotel room in any of the Indian metros cost in the range of 14,000 to 17,000 rupees (S$425-515). Compare this to Singapore, Thailand or Malaysia, where a similar room can be had for around 10,000-12,000 rupees.
As a precursor to the current slowdown, in this year’s off-peak period (May to October) hotels reported occupancies of 70 per cent against 75 per cent last year. According to estimates, in the last six months, the average occupancy rate across the industry fell by 10 per cent, impacted by the US sub-prime crisis that began in September last year and growing domestic terrorism.
In fact fewer foreign tourists are expected to visit India this year following bomb blasts in some cities the past few months. They typically account for about 70 to 80 per cent of a hotel’s revenues.
All major hotel groups, including the Oberoi group, Taj, Leela Ventures and Asian Hotels, were busy fleshing out aggressive expansion plans with a combined capital outlay of around 45 billion rupees. International players like the Starwood Hotels, Hilton Hotels, Raffles Holdings and Shangri-La Asia too have entered the Indian market with much fanfare.
But now, most groups are busy applying brakes on expansions. Furthermore, according to industry forecasts, Indian hotels are unlikely to see a buoyant phase before 2010 when the Commonwealth Games, being hosted by the capital city, will spike demand for more rooms.
However, despite the current gloom, there’s optimism still. Says Ilan Weill, general manager at Grand Hyatt in Mumbai: ‘Though the economic slowdown has impacted the hospitality business in the short term, it’s unlikely to do too much damage in the medium and long term. India has a fairly strong positioning in that sense as compared to other countries. And its economy is far too resilient for such temporary setbacks.’
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