The Hindu Business Line : Hotel sector hopes the worst is over

Mumbai, Nov. 6 The ghosts of the first quarter continued to haunt hotel companies in the second quarter too. With no increase in uptake, their profits only shrank further.

Though traditionally a weak quarter, companies could not match last year’s performance. While Indian Hotels Company’s net profit crashed 76 per cent to Rs 12 crore (Rs 51 crore), EIH ended up reporting a loss of Rs 10 crore against a profit of Rs 31 crore last year. Hotel Leelaventures’ performance was no better with profits plummeting 97 per cent to a mere Rs 2 crore (Rs 24 crore).

“Occupancies in leisure destinations remained depressed for the second quarter. They were down three per cent because of the lean season and the swine flu scare. However, business destinations saw an improvement of 7-8 per cent in occupancy levels,” said Mr Rashesh Shah, an analyst with ICICI Direct.com.

Foreign tourist arrivals, after seeing an upswing in the months of June and July, fell 0.8 per cent in August and September, he added.

While average room rates saw a decline of 2.5 per cent, compared with the first quarter of 2009-10, Revpar (revenue per available room and the real indicator of performance) increased 6.5 per cent. In the first quarter, it had crashed 33-35 per cent.

According to analysts, the industry has bottomed out with the second quarter hitting rock bottom levels. They expect an improvement from now on.

“The peak season begins in October and the scenario looks encouraging. Last year, global economic conditions hit foreign tourist arrival numbers. Now, with external factors remaining normal, one can expect to see some strengthening of ARRs (average room rates) by about 3-4 per cent on a year-on-year basis. Occupancy and Revpar could go up by 8-9 per cent and 10-11 per cent apiece,” said Mr Shah.

Hotels have incidentally adopted a shift in strategy on ARRs by quoting lower room tariffs and focusing on occupancy in an attempt to woo back their clientele.

Mr Anil P. Goel, Executive Director-Finance, Indian Hotels Company, said, “Once we came out of last year, for the January-March quarter and April, there was no business in the books. Typically, in the hotel business, we have had a fair amount of advance booking in the system. This is a good parameter to understand what is going to happen and helps us in terms of pricing, allocation and so on. As the pipeline was nearly dry, we had to rebuild the business from scratch. Bookings are beginning to happen but getting closed at short notice.”

Related Stories:
Hospitality sector ‘unaware’ of infrastructure tag
Luxury hotels offer hot deals, cool prices
Luxury hotels report better occupancy as industry recovers
Hotels may skip annual tariff revision this year
Hotels, travel cos dole out festival packages
Vacant rooms hit hotels’ profits