Hotel occupancy down, revenues up

Arvind Jayaram | Updated on August 18, 2012 Published on August 18, 2012

Foreign tourist arrivals in India have soared and Indians are travelling like never before. Yet, large hotels in India have seen their occupancy rates fall. How did this happen?

The mushrooming of hotels and their ambitious expansion plans seem to be the answer.

Consider the numbers. The number of foreign tourists travelling to India has risen by 23 per cent since 2007 to around 6.3 million in 2011.

The number of domestic travellers visiting destinations within India too grew by 61.6 per cent over the same period, to 850.9 million visits in 2011.

Foreign tourists also upped their spends in India, with the total revenues from tourism shooting up by 75 per cent in five years.

But occupancy rates in hotels across India dipped from 66.8 per cent to 62.1 per cent by December 2011.

Mushrooming of hotels

The low occupancy rate can be explained by the boom in new hotels. There was a near 75 per cent rise in the number of hotels in the country during 2007-2010.

The excess room capacity was particularly felt in metros such as Delhi. From over 82 per cent in 2007, room occupancy has fallen below 60 per cent in the national capital.

A similar situation exists in Bangalore, where room occupancy was an abysmal 53 per cent last year, lower than the national average.

Mumbai has fared slightly better than other metros. Room occupancy in the business capital of India averaged 69 per cent in 2011, which seems to reflect the high number of business travellers to Mumbai.

Hotels in cities such as Chennai have also managed to maintain their room occupancy rates above the national average, at 64.8 per cent. So has Kolkata, with an average hotel room occupancy rate of 65.4 per cent in 2011.

Cheaper lodgings

But an examination of room occupancy rates at popular tourist destinations such as Goa, Shimla and Jaipur suggests that both domestic and foreign tourists could be eschewing expensive hotels in favour of cheaper lodgings, one of the USPs of travelling in India.

Despite the parsimonious mood among tourists, it was the super-premium hotels that added the most number of rooms.

While the number of above five-star graded hotels in the country shot up by 64.5 per cent from 2007 to 153 in 2011, the five-star category grew by 84 per cent to 149 hotels.

More sedate growth was observed in the three-star category — in which the bulk of the hotels were ranked. Heritage hotels also expanded by 76 per cent.

> arvind.jayaram@thehindu.co.in

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Published on August 18, 2012
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