Hotels room rates slashed in most cities: Survey

Amrita Nair Ghaswalla Mumbai | Updated on March 12, 2014 Published on March 12, 2014

Hotels are slashing room rates to attract customers in the face of increased supply. - Mohammed Yousuf

Jodhpur has the highest average room rates and Thiruvananthapuram the lowest

Average occupancy across Mumbai hotels has more or less remained stagnant at 2008 levels, despite average room rates quoted way lower than in 2008.

In the Delhi NCR region, however, the average occupancy was lower than 2008 levels while room rates were higher than in 2008.

Down trend

With the Indian hospitality industry emerging as one of the key industries driving the growth of the services sector, a FHRAI Indian Hotel Survey has noted a marked downward trend over the last five years in average occupancy and room rates for 33 cities across the country.

While the Delhi NCR region had an average occupancy of 64.8 per cent in 2008-09, it has slipped to 57.1 per cent in 2012-13. However, room rates, which were ₹6,087 in 2008-09, have climbed to ₹7,456 in 2012-13, noted the survey.

In the case of Mumbai, average occupancy was flat at 71.5 per cent in 2012-13, as compared to 71.2 per cent in 2008-09, despite lower room rates of ₹5,971 in 2012-13, to the average rate of ₹6,822 in 2008-09.

Room rates

Across the 33 cities surveyed, Jodhpur had the highest average room rates at ₹8,431, while Delhi and Gurgaon were next at ₹7,000 plus. Thiruvananthapuram was the lowest at ₹1,474, the survey showed.

As MD Kapoor of the Federation of Hotel and Restaurant Associations of India (FHRAI) pointed out, 2013 was a challenging year for the industry on account of the global and domestic slowdown.

“This is also visible in the pressure witnessed on hotel occupancy and average room rates,”' he said, adding that hotel companies had prioritised realignment of their cost structures, optimising operational efficiencies and were adopting flexible business models.

Rate cuts

The survey was conducted with HVS Hospitality Services, which has noticed a trend, where hotels are dropping average rates to attract customers in the face of increased supply.

“As a result, a new customer mindset is emerging that is sensitive to the price instead of the traditional one, which was more loyal to a hotel or brand. As operators battle increasing departmental costs and owners struggle with debt service payments, hotel companies need to reconsider their rate strategies,” an HVS official pointed out.

HVS has estimated that major cities across the country witnessed a growth of 11 per cent in hotel room supply in 2012-13, while demand exhibited a strong increase of 9.2 per cent during the same period.

Branded rooms

Currently, HVS is also tracking a proposed supply of 84,650 branded rooms, of which 60 per cent is actively under development and is expected to enter the Indian hotel market over the next five years.

Given the anticipated increase in hotel room supply, together with a high inflationary environment, HVS has reemphasised the need for operational efficiency in order to curtail further decline of profitability.

While the United Kingdom and the United States of America are the largest international source markets for the Indian hospitality sector, contributing 23 per cent of the overall demand in 2012-13, the survey noted that their share continues to decline, as witnessed by the 4.3 per cent drop this year, as compared to last year’s arrivals. However, Indian hotels have seen a greater contribution from the Middle East, Russia, and the SAARC nations.

Published on March 12, 2014
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