Room revenue declines 34% at five-star hotels

When companies cut costs, hotels pick up the tab. Occupancies, average room rates and revenue per available room have shrunk significantly across India’s premium segment hotels in the first quarter.

A Crisil Research report which surveyed six cities, said the average revenue per available room (RevPAR) fell by 34.4%, from Rs 6,583 in June 2008 to Rs 4,315 in June 2009.

Average room rates (ARRs) also edged down 25.5% year-on-year to Rs 7,639 in June 2009, whereas occupancy rates (ORs) declined from 64% to 56%. The six cities tracked included Mumbai, Delhi, Kolkata, Pune, Bangalore and Goa.

The pressure on business seems to be building up gradually as the hospitality sector’s business performance numbers have only declined from May 2009. Interestingly, occupancy rates at leisure destinations such as Goa have fared better compared with business locations.

While the average RevPAR in May 2009 stood at Rs 5,171 (Rs 4,315 in June 2009), the premium segment hotels registered average room rates (ARRs) of Rs 8,011 (Rs 7,639 in June 2009). ARR is the average rate of the total number of rooms sold and RevPAR is the revenue against the total room inventory in the hotel. Both ARR and RevPAR during June were down by 4.64% and 16.55% compared with May 2009, and the only silver lining was a marginal increase in the occupancy rates of 56% in June 2009 as compared to 55% in the previous month.

Occupancies surged owing to decline in room rates by most of the hotels under review.
Sridhar Chandrasekhar, head of research for Crisil Research, said the numbers may not be any different in July.

“The fundamentals are still weak and the business environment remains the same. Besides, there is nothing happening in the demand revival side that could stimulate consumption,” Chandrasekhar told DNA Money.

Raymond N Bickson, managing director and CEO of The Indian Hotels Company that runs the Taj Group of Hotels, said that the global hospitality industry is going through some challenging times and India is no exception.

“But good first-quarter results indicate business for hoteliers may not be as bad as it was in the last couple of months. I think it should pick up by the time we enter the main business season (October onwards),” Bickson said.

Pune, Hyderabad and Chennai registered the sharpest decline in occupancy, while Bangalore recorded the highest followed by Goa. Occupancy in Pune fell from 66% to 43% June on June, while Hyderabad nosedived from 65% to 47%. Bangalore recorded the highest occupancy at 66%, followed by Goa at 61%.

“A very interesting point to note here is that while occupancy rates across all leisure destinations rose, business destinations witnessed a substantial decline,” Chandrasekhar said. Despite registering steepest decline in room rates, Bangalore still remains the costliest destination with an average room rate of Rs 9,137.

Barring Jaipur, room rates across all cities under review declined. In RevPAR terms, Pune saw the sharpest decline by 49% to Rs 2,754. Bangalore hotels saw a decline of 40% to Rs 6,076. With the exception of Goa and Jaipur, all other cities reported steep falls.