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The next six months look bleak for the hotel industry. Poor business sentiment is one reason. The other is the large number of rooms the industry has added.
Analysts believe this double whammy will hit occupancy levels and rack rates. Mr Kamlesh Barot, president of the Federation of Hotels and Restaurants Association of India (FHRAI), said: “If the Euro Zone does not stabilise and the US unemployment figures do not turn to the better, our top two inbound feeder markets will generate headwinds this winter.”
Austerity measures
At home, he said, the high airline tariffs, industrial slowdown and the government’s austerity measures would take a on the spending power of corporates.
According the industry body’s estimates, the hotel industry will grow by about 5.5 per cent this year compared with 7 per cent last year.
Mr Dipak Haksar, chief operating officer, ITC Hotels, said: “We analyse quarter by quarter. In the current quarter, there is sluggishness in demand from corporate and leisure travellers.”
April, May and June are considered the slowest months, especially for business hotels. Corporate activity starts gaining momentum from August-September. But analysts believe occupancies will remain flat even in the busy season. “It will be difficult for business hotels to increase rates in the winter season as they will try to retain key corporate accounts and maintain occupancies at the same level as the previous year,” said Mr Kaushik Vardharajan, MD, HVS Global Hospitality Services - South Asia.
He added that the uncertain economic environment has already made corporates reduce travel spends.
Drop in demand
Business hotels, especially in the luxury and five-star categories, have are already seen a demand drop of 10-15 per cent, say analysts. “The government’s austerity measures are also impacting top-end city hotels,” said Mr Siddharth Thaker, managing partner at Prognosis Global Consulting.
But hotels remain hopeful on room rates. “Due to the devaluation of the rupee, we will be able to increase room rates this winter season,” said Mr Rajiv Kaul, president, The Leela Hotels.
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