Downturn weeded out the not-so-serious players

The hotel industry had feared that 2010 would be a difficult year for it. That was because a significant proportion of the new hotel development pipeline was to start getting operational from this year. This would have created a major imbalance in the demand-supply equation, dragging down occupancies and room rates, thereby impacting bottomlines.

The envisaged scenario got preponed a bit and the demand supply imbalance happened a year earlier. Not because of the oversupply, but owing to a drop in demand after the 26/11 terror attacks in Mumbai and the events that followed, including lay-offs across industries, the crash in the stock market and the outbreak of swine flu, among others.

The economic downturn helped weed out several short-term players. Consumption of hospitality and travel products and services declined significantly, throwing a lot of players out of business. What remained was a highly focussed group of entrepreneurs (including realty partners) that understands business, knows what to expect, and is willing to stay put and play a part in the industry’s growth.

Some of the interesting merger and acquisition deals cracked during 2009 included Duet Hotel’s acquisition of the Dawnay Day portfolio, Taj Group’s acquisition of Sea Rock hotel and Travelocity’s acquisition of online travel agency Travelguru.com.

A significant fallout of the downturn was that distressed assets suddenly became the talk of the town and the opportunists left no stone unturned to benefit from it.

Fortunately, the recession was shortlived and, by September-October, signs of revival started showing up. Revival of the stock market, fairly commendable quarterly results from the corporate sector, Centre’s boost to banking and increased focussed on infrastructure spending and enticing offers from the services sector helped increase consumption.

Among interesting trends witnessed in the Indian hospitality sector were an increased focus towards tapping the meetings, incentive, conference and exhibitions/events segment, which continues to remain crucial.

The emergence of the third-party hotel management companies was another interesting trend and so was the fact that hotel companies from the Asia-Pacific region were seen queuing up for their India foray.

The listing of travel company Cox & Kings and its trading at a significant premium on day one was a deciding confidence-building moment for the travel trade.

The last quarter of FY’09-10 is showing signs of a turnaround in the Indian hospitality and tourism sector. A host of new hotels across categories were being launched across key markets including Mumbai, NCR, Jaipur, Bangalore, Hyderabad and the momentum is expected to continue through out 2010.

The tourism industry had its own story to tell. While the number of international tourists slipped marginally from 5.37 million in 2008, the fact that 5.13 million international tourists came to India despite the contraction in the global economy is commendable.

This eventually is having a positive impact, with hotels seeing good occupancy levels though room rates still remain under pressure.

All in all, the outlook for 2010 is very optimistic for every stakeholder in the Indian hospitality and tourism sector.