Musafir Says

Your hotel room just got cheaper

OPINION 

It’s not just the airlines, though perhaps their rivalries are more visible. A related sector, hospitality, is also going through one of its worst seasons in India. When Hyatt announced a 50 per cent ‘Monsoon flash sale’ on the last day of July in Chennai, a city that has seen a augmentation of hotel room inventory come up in the past couple of years, national and international rushed to beat the offer.

A combination of factors have meant that the hospitality sector has suddenly been reduced to giving huge discounts. A delayed supply of capacity, planned nearly half a decade ago when the boom times had seemed eternal, is opening now. The flow of international business passengers has become a trickle, largely due to negative publicity for India’s lack of safety issues. And of course it is summer, anyways the traditional low season for hotels in India.

HVS’ Hotels in India Trends and Opportunities is revealing. Rates across all categories of star hotels have come down this year, according to a new report. An average night at a five-star deluxe hotel costs Rs 8,774 this year (-2.3% lower than in 2012-2013). While a five-star hotel costs Rs 5,635 (-4.2%), the four-star segment costs Rs 4,417 per night (-5.8%), and the three-star category would set you back by Rs 3,119 per night (-4.1%). According HVS, the hospitality sector continues to see sub-60% hotel room occupancies.

The number of branded rooms however is increasing fast. India now has over 1 lakh branded hotel rooms. Occupancy however is low, almost declining, at 58.9% for 2013-14. Industry wide, average room rates have slipped to Rs 5,531 per night. The country saw an increase in supply of hotel rooms at 17.8% in the past five years, while demand registered a growth of 17.6% in the same period.

However the prospects for the next few years look to be better. The performance of existing hotels, the report adds, is expected to grow by under 10% in 2014, about 12% in 2015, and approximately 11% in 2016.

It is expected that cities such as Kolkata will see a huge increase in supply of hotel rooms in the coming years at 115%. Noida is expected to grow at over 215% from its current rate.

India received 6.9 million inbound tourists this year. Over 80% of the country’s tourism revenue came from domestic travel.

The Hyatt step was construed as a bold move, and one that is possible for hotel chains that have a large inventory and international reputations. For a smaller hotel, such rates may spell disaster in an economy already impacted by spiralling economy and falling demand.

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