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Peak season brings little cheer for hotel industry

Ruchika Chitravanshi/New Delhi 08 Nov 12 | 12:02 AM
Related to : EIH Ltd
 EIH Ltd

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The much-awaited peak holiday season is unlikely to bring much cheer to the hotel sector. Grappling with declining occupancy and room rates, it is treading cautiously towards November-December, when hotels draw the highest number of guests.

“Pre-Diwali occupancy rates have not been very encouraging, especially in non-metro cities. It has been around 50 per cent for most hotels in October, compared to last year’s 55-60 per cent," said Kamlesh Barot, president of the Federation of Hotels and Restaurants Association of India.

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Figures for the last two quarters show the hospitality sector is still facing rough weather. Indian Hotels Company registered a net loss of Rs 6.4 crore for quarter ended September 30, due to high operating costs and foreign currency fluctuations. East India Hotels, which operates the Oberoi hotels chain, posted a net loss of Rs 18.3 crore on lower occupancy levels.

The group, in a press statement, had said the results were not indicative of the full year’s performance.

Even as the hospitality sector is banking on the peak season to significantly cut losses, it looks difficult, experts say. Figures clearly suggest there has been a slowdown in demand. The foreign tourist arrival numbers for October have shown sluggish growth of just about three per cent against a 10 per cent for the same period last year. Growth in foreign exchange earnings also dipped to eight per cent from last year’s 21 per cent for October.

Compared to the previous quarters, the demand is picking up but hoteliers are in no mood to raise room rates at the cost of losing customers. “Room rates will remain flat, though we are seeing three to four per cent rise in occupancy," said Dilip Puri, managing director, Starwood India.

Travel agents are seeing flat growth in the inbound tourist segment. Much of this is attributed to the global slowdown. There is also an oversupply problem in the sector, which will take time to absorb, experts say.

An HVS study indicates by 2015-16, 1,02,438 rooms will be added to the total inventory.

Domestic tourism, which has not seen any sign of slowdown, is driving the demand for most travel and hospitality companies. But the biggest source markets for the hospitality sector are the US and Europe, where demand is still weak, said Barot. It is the tourists from destinations like the US and Europe who are considered the lifeline for luxury and five-star hotels.

Also, India loses foreign tourists to destinations such as South-East Asia, which offers more affordable options. “Aside of Goa and Kerala, which are the only two destinations we have managed to sell, there are no other options available for foreign travellers. These places are always fully booked during this time of the year. But leisure hotels everywhere else are struggling," said a senior executive of a leading travel firm who did not wish to be quoted.

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