The Hindu Business Line : More rooms depress occupancy levels, rates

Chennai, Sept. 13 The addition of more rooms during the past year depressed occupancy levels and consequently average room rates (ARRs) at the top-end of the hospitality market in Bangalore. During April-July 2007, occupancy levels were two-thirds of available rooms compared to three-fourths during the same period in 2006. As a result, the rooms rates for the April-July 2007 period had eased to Rs 12,616 against Rs 13,159 earlier (April-July 2006).

According to Crisil Research, reflecting the lower demand in July 2007, the average room rate for the month stood at Rs 11,930 against Rs 12,919 in the previous corresponding month. The addition of 700 rooms (all categories of hotels) during 2006-07 sparked off the declining trend in the city, which has for long topped occupancy and room rates in the country owing to the demand from the IT companies.

According to the research firm, which studies the premium end of the hospitality market, occupancy and consequently rates are likely to remain under pressure as more rooms are likely to be added in the coming years.

While confirming the downward trend, Mr Sunil Prabhakar, Sales Head, Leela Palace, said the Leela continues to top average room rates in the city with the rate currently pegged at Rs 15,500 and occupancy at 80-85 per cent. The average rate at the same time last year was Rs 16,500, he said.

“Demand has dropped so hotels have had to drop their rates in order to maintain business,” Mr Prabhakar said.

Mr Premal Zaveri of HVS, Mumbai, a hospitality consultant, says the hospitality sector in Bangalore would see a mid-term correction and average room rates would stabilise in three-four years.

Further, the softening trend is limited to the Bangalore market. For instance, the rates in Chennai were steady as the market was price-conscious. Also, demand was substantially lower with only limited demand from the leisure market and slightly higher demand from the business customer, he said.

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