The Hindu Business Line : Surge in occupancy levels of Mumbai hotels

Improvement in macro-economic factors has been responsible for tourist inflow and occupancy rates. But new capacity additions in the luxury segment could lead to flat rates in future. Though south Mumbai hotels are facing the heat from the mushrooming of hotels in the northern suburbs, overall the times are good for the hospitality industry.

Mr Ravi Dubey, Senior Vice-President, Corporate Affairs, Indian Hotels Company Ltd said, "There has been a huge turnaround for the Taj. I don't have a single empty room today and even the banquet space is occupied. We expect to sustain this trend till the peak season is on.''

The Oberoi Group of Hotels is also expressing similar sentiments. Mr Biswajit Chakraborty, Regional Director (Sales), The Oberoi Group, says, "Recovery in occupancy started this September onwards and occupancy levels have been between 70 and 85 per cent. I would call it a resurgence for the industry after 9/11 and the Kargil war.''

Mr John Toomey, Director (Marketing), Marriott International, India, adds, "Today the demand for 5-star rooms in Mumbai far exceeds the supply. Aggressive marketing by the Union Government abroad has increased foreign tourist inflow and the domestic market has also seen a surge in domestic travel to and from the metro cities. The CMIE (Centre for Monitoring Indian Economy) has predicted that the Indian economy will grow by 7.4 per cent in the year 2004. This has kept Mumbai's hotel occupancy running at an average of 60 per cent.''

While adverse conditions for travel have ceased, new capacity additions in Mumbai could cap occupancy rates in future. Giving an overview of the Mumbai hotel scenario, Mr Navjit Ahluwalia, Associate Director, HVS International, a hotel consultancy company, says, "Occupancies have been on the rise but south Mumbai hotels have not been doing as well compared to the hotels in the northern suburbs.''

According to HVS International research, occupancy levels for Mumbai hotels for the period between April and November have surged from 52 per cent last year to 63 per cent this year. But the hotels in north Mumbai have fared better and have recorded 71 per cent occupancy levels in contrast to the south Mumbai hotels, which have recorded occupancy levels at 52.8 per cent.

Adds Mr Ahluwalia, "This is the peak of the busy season and hotels will see occupancy levels rising. However, occupancy rates are still not going up since the demand for rooms has not crossed the threshold level.''

New properties will ensure that supplies surpass demand leading to bottoming of occupancy rates. For instance, when the Intercontinental recently opened on Marine Drive with its 59 rooms, it created a 3 per cent increase in south Mumbai capacity. With the market growing at 2-3 per cent in south Mumbai, new capacity could lead to flat occupancy rates for other hotels, says Mr Bharat Parekh, Assistant Vice-President at DSP Merill Lynch.

The lopsided division of business between the south and north-based hotels is also likely to diminish.

As Mr Chakraborty says, "Initially there were more businesses for the hotels in the northern suburbs because new and old companies were being relocated. But now the business will stabilise and south Mumbai hotels are expected to bounce back.''

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