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Indian Hotel Industry: Way To Go

Post the global slowdown in 2008-09, the hotel industry has taken a while before returning on the growth track. There are a number of factors adversely affecting the Indian hotel industry. Some of these are explained below. 

  • Global economic slowdown meant lower travel by foreign tourists. Number of domestic travelers also declined due to slower economic activity.
  • Although the foreign tourist arrival numbers have improved, European travelers are still lower in number. In fact, the share of domestic travellers is rising. However, revenues earned from domestic travellers are usually lower than foreign tourists.
  • Improvement in business and leisure travel has resulted in better demand for rooms. This has led to better occupancy rates in hotels. This, in turn, has led to higher room rates.
  • Average room rates in the cities like New Delhi, Mumbai and Bangalore were up 5-6% in luxury and first class hotels in 2010-11 compared with the last fiscal year, reported The Economic Times.
  • On a pan-India basis, average rates were up 5.8% in 2010-11 compared with the previous year. Average rates were down by about 18% for hotels nationwide in 2009-10 compared with 2008-09. 
  • While occupancy and room rates were higher compared to the past few quarters, higher costs dented profits of the hotel industry.
  • Major costs for hotels include food & beverage, wages and interest.

Hotel Projects in India

Company Name Project Name Rooms to be added Serviced Apartment Cost in ` crore Expected Completion
Indian Hotels Co. Ltd.  Delhi ‘Vivanta-by-Taj’ Hotel Project 400 0 750 Jun-11
Phoenix Mills Ltd.  Mumbai ‘The Shangri-La Hotel’ Project 410 23 830 Jul-11
Indian Hotels Co. Ltd.  Gurgaon ‘Vivanta by Taj’ Hotel Project 200 0 750 Sep-11
Hotel Leelaventure  Chennai ‘Leela Palace 329 0 550 Sep-11
I T C Ltd.  Chennai Seven-Star ‘Grand Chola’ Hotel Project 600 100 1,200 Dec-11
Robust Hotels Pvt. Ltd.  Chennai ‘Hyatt Regency’ Five Star Hotel Project 330 0 550 Dec-11

Source: CMIE

The hotel industry will continue to witness a pressure on profit margins due to rising costs. It is estimated that the hotel industry is facing a severe human resource shortage which has led to higher wage and salary cost. A substantial portion of the undergoing capex by the hotels in India is funded through debt. Rising interest rates are likely to dent profits.

On the revenue front, supply of rooms is expected to rise at a rapid pace. According to CMIE, nearly 25,000 rooms are slated to be added to the existing rooms across India during 2011-12. This will exert slight pressure on the average room rates.


Categories: Tourism
  1. statistika
    November 19, 2011 at 6:24 am

    What an all ’round incredibly written piece…

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