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No Room for Slow Down in the Hospitality Industry
Tuesday, April 22, 2008

Forget slowdown jitters and dollar decline, Indian hospitality industry registered strong growth in 2007-08. Though hotel occupancies in Bangalore, Hyderabad and Pune dipped marginally owing to over capacity, average room rates (ARRs) for branded hotels across star categories continue to witness robust growth in most cities.

As per hotel consultancy HVS Hospitality Services, Delhi and Mumbai witnessed highest room rates in the country pegged at around Rs 10,200 per night. Bangalore finally saw a marginal correction in room rates. It recorded a room rate of Rs 10,100, marginally lower than Rs 10,545 that it commanded last fiscal.

Occupancy-wise the country's commercial capital Mumbai performed the best, followed by Delhi and Kolkata. While branded hotels in Mumbai registered an average occupancy of 80%, Delhi was at 78% and Kolkata at 77.4%. "Overall the occupancies in most markets softened while ARRs saw a marginal increase. Going forward, we will see correction in ARRs in next two years. Most of the markets have peaked out in terms of occupancies though revenue wise this was one of the best years for the hospitality industry," says Siddharth Thaker, associate director, HVS Hospitality Services.

Though occupancies were not significantly higher this year, hotels still managed good revenues due to dearer room rates. Says Raymond Bickson, MD, The Taj Group of Hotels, "Across board we registered occupancy of 75%. The RevPar (revenue per room) for this year has been good. ARRs may soften a bit though overall tourism sector looks strong."

Most branded hotels, especially in five star categories, though have cause for concern in Bangalore. As unbranded hotels proliferate in India's silicon city, occupancies are softening. "While Delhi and Mumbai properties performed well, occupancy has decreased for our Bangalore property. The ARR too is not growing. Bangalore will be the focus of our sales and marketing strategy this year and in fact for most hotel chains," says Farhat Jamal, COO, The Grand Group of Hotels . The group at present operates seven hotels in the country and has witnessed a growth of 22% over last year.

The rupee appreciation, expected to be a dampner on revenue, didn't make any significant impact after all in 2007-08. "Yields were not impacted primarily as most hotels had started quoting in rupees in the second half of the year," says Peter Leitgeb, president & CEO, The Claridges Group of Hotels.



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