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Tourism dollars flood hotels

Saturday, 22 September 2007 - 5:35am IST

International tourism expenditure in India is expected to rise to over $10 billion in 2008 from the levels of $8.7 billion recorded in 2006.

Room rents have risen in excess of 30% during the year

KOLKATA: International tourism expenditure in India is expected to rise to over $10 billion in 2008 from the levels of $8.7 billion recorded in 2006, according to a Deloitte study, with the hospitality sector generating the lion’s share. Approximately, 80% of foreigners come to India on business.

The surprise in the pack is Kolkata. Though revenue per available room (revPAR) remains the lowest of the gateway cities, Kolkata’s rate of growth is among the country’s highest. An average room rate rise of 35.7% in the year to March 2007 is on par with Delhi’s, says the study. ARRs for this period stand at $120, having hit a peak of $160 in January 2007, while revPAR grew 35.6% to $83. But as the city’s status as a centre of industry grows, will supply outstrip outstrip demand?

Delhi, the starting point for a majority of tourists to India, registered a big 35.7% rise in the 12 months to March 2007, forcing ARRs to go up to $225, the highest among all Indian cities.

The main reason for this is, of course, under-supply. The market in Delhi is dominated by the five-star and five-star deluxe properties.

Mumbai, which, together Delhi, accounts for the bulk of inward arrivals, experienced a revPAR growth of 40.8% in the period under review. This, again, is due to a sharp increase in ARRs which rose 35.6% to $202 over the same period. Occupancy stood at 75.9%.

Chennai, with a revPAR of 27.2% in the same period, follows the pattern of gateway cities. ARRs rising 32.5% to $135, accounted for this growth while occupancy fell slightly to 75.2%.

Direct air links with Asean countries and West Asia show strong potential for further growth through MICE tourism, says the Deloitte study.

But can ARRs be forced higher in future and if so, how high? Already Mumbai and Delhi have ARRs comparable to the traditionally most expensive cities in Asia.

However, Manav Thadani, managing director, HVS, which tracks hospitality industry trends, told DNA Money: “Yes, India today is amongst the more expensive hotel markets. But it is definitely not up there. Hotels in global cities like New York, Tokyo, London, Dubai, Hong Kong have much higher tariffs than Indian hotels.”

He added: “Luxury hotels in New York city and London will be upwards of $300 and $400 respectively. They also offer much better infrastructure which none of the Indian cities can boast of and should, therefore, not even be compared.”

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