The Hindu Business Line : Hotel cos ride high on room rates, higher occupancy

On upcurve
IHCL net profit was up by 71 per cent at Rs 135 crore
Hotel Leela posted 18 per cent growth at Rs 45 crore
Royal Orchid’s net grew 37.5 per cent to Rs 11 crore

Shubhra Tandon

Mumbai, June 30 With room rates and occupancy remaining strong, hotel companies with a presence in key areas such as Mumbai, Delhi and Pune, have performed well in the quarter and year ended March 31, 2007, say analysts.

Companies have posted net profit growth between 25 and 40 per cent, which, Mr Pratik Dalal from SBICAP Securities Ltd says, “is a decent growth compared to last year’s performance”.

Indian Hotels Company Ltd, which runs the Taj Hotels Resorts and Palaces, with a growth of 71 per cent in net profit to Rs 135 crore (Rs 78 crore) has performed “outstandingly” well, according to Mr Dalal. Hotel Leela accounts its slow growth in the quarter ended March to “the saturation of room prices in Bangalore”, the property that accounts for maximum revenues for the hotel. Leela recorded a growth of 18 per cent in its fourth quarter net profit to Rs 45 crore (Rs 38 crore).

So is the case with Bangalore-based Royal Orchid Hotels Ltd. “The hotel’s room prices are at mid level and there is space for premium room rates,” says an analyst. The hotel registered a growth of 37.5 per cent in net profit to Rs 11 crore (Rs 8 crore).

Premium category

The other premium category hotel, East India Hotels Ltd, a member of the Oberoi Group, has also registered a growth of 59 per cent in net profit to touch Rs 59 crore (Rs 37 crore).

The Asian Hotels, on the other hand, has registered a net profit of Rs 34 crore, a growth of 48 per cent from Rs 23 crore in the corresponding quarter last year.

However, the way ahead from here, Mr Dalal says would be for hotels with “good expansion plans reflecting growth in their profitability.” While in Bangalore, the room rates have already touched peak, the Hyderabad market will take time as the supply of rooms meets the demand now, he adds. Mr Dalal says companies with plans in Mumbai, Pune, Kolkata and Delhi should do well as room prices are still “robust”.