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The hotel industry in India is looking at an increase in room tariffs between 6-10 per cent. City and property-specific hikes could be even higher.
Sources say, the hike comes on the back of better renegotiated corporate rates for the second straight year. Hikes in corporate rates have been in double digits (of around 10 - 15 per cent in some cases) beginning late last year.
Corporate clients make up for around 50-60 per cent of occupancies across branded hotel chains; followed by occasion-specific bookings and so on.
“Yes, we have been witnessing an upswing for the second year in a row. The demand growth is expected to outpace supply through 2019. Pan India occupancies are also reaching healthy levels, which augers well for the industry,” Dipak Haksar, Chief Executive, ITC Hotels & WelcomHotels, told BusinessLine .
ITC Hotels is witnessing “an improvement in yields” he said, adding: “The rate revisions have already been in play since October 2018 and we continue to see the resultant outcomes.”
According to Vijay Dewan, MD , Apeejay Surrendra Park Hotels, corporate rate revisions in some properties are as high as 15 per cent; while on an average they are upwards of 10 per cent. Occupancy levels in some prime locations are hovering at 72 per cent.
“Corporate rates have been renegotiated. The average room rates for the industry are expected to see a 6-per cent rise over last year and the room supply is stabilising,” he said. In fact, Sarovar Hotels’ MD, Ajay Bakaya, also confirmed that corporate rates are being renegotiated upwards of 5 per cent in 2019. Occupancies across hotels in India too are witnessing a rise, hovering around the 68-69 per cent mark. This was amongst the highest increase in a decade.
Improved sentiment
Research agency ICRA expects revenue improvement and margin expansion for the industry. The CAGR growth is expected to be a strong 10-12 per cent during FY-19. Margins are likely to expand due to operating leverage, with return of stronger revenue growth.
“The average room rates (ARRs) have slowly but steadily started to improve on a pan-India basis,” said Pavethra Ponniah, Vice-President and Sector Head, Corporate Sector Ratings, ICRA.
The RevPAR (revenue per available room) also improved following an uptick in ARRs and occupancy. RevPAR is calculated by multiplying a hotel’s average daily room rate by its occupancy rate.
According to market sources, in FY18, the average room rate for the hotel industry in India stood at around ₹5,760; while RevPAR stood at ₹3,837.
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