Tourist arrival has little impact on hotel business

A 10% increase in the foreign tourist arrival (FTA) figures, into India, during January 2011 has had a rather insignificant incremental impact on the overall hotels business across key business and leisure destinations.

A comparative analysis of business performance numbers by Crisil Research indicated that average room rates (ARRs) recorded a marginal decline, thereby leading to marginal improvement in revenue per available room (RevPAR) and occupancy levels. A key indicator of hotel’s performance, RevPAR is calculated by comparing total revenues of the hotel with total guestroom inventory.

Another interesting revelation was that hotels in the south, namely Bengaluru, Hyderabad and Chennai, have shown positive growth on all three parameters (occupancy, ARR and RevPAR) vis-a-vis their counterparts in west (Mumbai and Pune) and north (Delhi, NCR) India.

Leisure destinations such as Jaipur, Agra and Goa saw higher single-digit growth in overall business on account of business season.

Commenting on the overall business scenario, Ajay D’souza, head of research for Crisil, said that while individual cities or destinations have demonstrated varied results based on their market dynamics, the overall figures for January 2011 are marginally down vis-a-vis previous year’s figures. 

“The average RevPAR for premium segment hotels in six major cities increased 2.6% to Rs6,900 in January 2011. Occupancy levels improved 3% year-on-year (YoY) basis to 73%. ARRs, however, witnessed a marginal 0.7% decline on a YoY basis to Rs9,450,” said D’souza.

The survey compared business performance numbers from premium segment hotels in Mumbai, Delhi, Kolkata, Pune, Bengaluru, Goa, Hyderabad and Chennai. The Crisil Research data on FTA showed that approximately 0.54 million tourists visited India in January 2011 as compared with 0.49 million tourists during the same period in the previous year.

Interestingly, hotel occupancy in Hyderabad, Chennai and Bengaluru witnessed an increase in the range of 10 to 16%, while hotels in Delhi and Mumbai suffered a setback by 2 to 4%. Key beneficiaries of the tourist season, however, were hotels in leisure destinations, wherein Goa registered the highest occupancy of 81%, while it was 72% and 71% in Agra and Jaipur respectively.

On ARR, hotels in Chennai saw a 4% increase on a YoY basis from Rs5,900 to Rs6,200 in January 2011. “While most business destinations witnessed stable ARRs, Mumbai and Pune witnessed a decline. Leisure destinations, primarily Goa and Jaipur, recorded a 5% increase in ARRs on a YoY basis,” said Crisil analysts Anshal Chavan, Swaroop G and Dipali Modi in the report.

Improved occupancy levels, coupled with an increase in ARRs, led to double-digit growth of 17% and 12% in RevPARs across premium segment hotels in Chennai and Bengaluru on a YoY basis respectively.

"While the initial few quarters were slow for these markets, there has been resurgence in corporate traffic movement vis-a-vis last year. In fact, the momentum still continues and we are seeing a month-on-month increase as far as business in these cities is concerned. Though static Hyderabad market has shown positive results, but I think with the new inventory set to enter the market in the coming quarters, there will be pressure on business," said Noshir Marfatia, associate vice-president and GM, sales and marketing, The Park Hotels.

Industry experts attribute the subdued performance of hotels in Mumbai, Delhi and Pune to the heavy guestroom addition these markets have witnessed in 2010. They said that while FTA figures do show growth, what one needs to take into account is the significant increase in the number of hotel rooms that were added.