‘90% hotel occupancy may not happen soon’

Rattan Keswani, president, Trident Hotels, feels it will take the Indian hospitality industry over a year to get back to normalcy from the economic slowdown. Ashish K Tiwari caught up with Keswani at the Oberoi group’s newly launched Trident Hotel at Bandra Kurla Complex in Mumbai to get more details. Excerpts from the interview:

How was the year like for the industry in general?
It has been a tough one for everybody mainly because a lot of the base of business is from overseas. While we may be comfortable being out of recession, it still doesn’t completely support the foreign visitor’s interest with respect to travelling. But, we are also seeing hope reasonably quicker. However, it will be very difficult to say if the hope is to the level of optimism. Certain key locations have witnessed sharp changes. For instance, Delhi has done very well and the next 3-4 months are looking very good there. Chennai and Bangalore are picking up while Kolkata has not been impacted at all. If we put all of it in perspective, I think the market scenario is looking fairly good for the industry. But getting back to normalcy will take us maybe a year or a bit more, provided no other eventuality hits the business environment.

What about the MICE (meetings, incentives, conferences and exhibitions) and leisure businesses?
The MICE market has been reasonably okay but not as large as earlier. Being largely international, the leisure market is still slow and it will take its own time to get back.

Isn’t domestic demand helping bridge the gap?
There is only a certain extent to which demand can be created domestically and everybody has done what was deemed necessary. Thankfully, we have had good long weekends this year coupled with some wedding dates linked with the weekends. So, we saw some good business in different pockets this year. The other factor was that occupancies and rates didn’t go down sharply which eventually improved the business scenario. That’s precisely why nobody has really kind of ‘died’ and hotels have done a decent 40-45% occupancy levels which is good. Having said that, I think the domestic market can never fill the vacuum created by the international segment.

What are the business performance numbers indicating in general?
City hotels have witnessed growth of 15-18% from what it was in the summer and monsoon months. The leisure markets grew only by 10-11% for the reasons outlined earlier. In the quarter ahead, most of the good city hotels would probably do 70-75% occupancy. Leisure hotels would be lower at 50% range. In terms of average room rates, Mumbai is around Rs 8,500 while Delhi is averaging upwards of Rs 10,500. Chennai is in the Rs 7,500 mark, Bangalore Rs 9,500 and Kolkata is at Rs 6,800. The numbers are about 10-12% lower than a very good business environment back in 2007-8. Reaching 90% occupancies will not happen so soon.

The Oberoi group seems to be pursuing management contracts in the domestic market...
We believe the company is now asset well-balanced, something we have been looking forward to. Thus, we now feel very confident about doing management contracts. The challenge earlier was with finding the right asset owning partners which is not the case now. A lot of people can be land developers but not all of them can sustain a business like this. I think, there is a better availability of choices now thanks to the way this industry has evolved in the last couple of years.

In tune with the asset-light strategy, will the group look to divest the hotel real estate but retain its management?
I don’t think we have looked at that option at all. Asset-light strategy will be pursued but it will be largely through new management contracts with minority equity position on a case-to-case basis. Shedding any of our owned properties to an REIT or a trust has never been part of our business model. We are quite comfortable where we are.

How about looking at franchising?
I don’t think any major quality hotel operation can truly be franchised. Quality is a part of brand standards, it’s about supervising it, inculcating the culture it stands for. That’s not possible with franchising as it’s purely a branding exercise.