IT slowdown takes a toll on hotels..

Room rates in Bangalore, Hyderabad see a drop after several quarters

BANGALORE: Even though some IT majors are in denial on the impact of the global financial crises on their businesses, there are some signs of an adverse impact. Hotel room rates in the tech cities have dropped, indicating a slowdown in business, particularly from tech travellers.

For the first time in several quarters, hotels in both Bangalore and Hyderabad have witnessed a softening of business. Average daily room rates during the April-September quarter in Bangalore, which not very long ago boasted of the costliest rooms in the world, have dropped 2.2% to Rs 11,350 from Rs 11,600 during the same period last year. Hyderabad also saw a 1.5% drop in room rates to Rs 6,518 from Rs 6,615 earlier.

However, while Bangalore also saw a decline in occupancy rates — from 67% last year to 65% during April-September this year — Hyderabad saw a marginal increase from 65% to 67% in the same period.

On the brighter side for the hotels industry, according to industry research and consulting firm HVS Hospitality Services, room rates have moved up for a few other key markets like Mumbai, Delhi, Kolkata, Chennai and Goa by between 3% and 22%.
The overall hospitality industry in India has seen a 11.9% growth in average room rates in 2007-2008 as opposed to a 30.0% growth in the previous year. Occupancy growth has declined by 2.7% in 2007-2008 — the highest decline in pure percentage terms since 2001.

Revenue per available room (RevPAR) has fallen 5.2% in April-September 2008 over the same period in the previous year. Goa saw a 9.2% decline.

However, Mumbai, Delhi, Chennai, Kolkata and Hyderabad have seen an uptrend.
Hoteliers feel uncertainty in the global market has not only affected the growth rate but has also impacted occupancy rates.

Ajoy Misra, senior V-P, sales and marketing, Taj Hotels Resorts and Palaces, said, “The hotel’s revenues continue to grow fairly impressively, though the rate of growth has slowed down marginally. The hotel industry in India has seen a marginal softening of occupancies but there has been growth in RevPAR over the previous year.”

Royal Orchid Hotels chairman and managing director Chander Baljee said, “Occupancy levels have come down in Bangalore, but we are able to sustain as other markets are performing well.” The company, which currently operates 12 hotels and plans to add eight properties to the chain by 2010, has no intention to increase the average room rate.

“We want to concentrate on increasing the occupancy rate,” Baljee added.
According to Manav Thadani, managing director, HVS International-India, an overall correction may be still 12-15 months away in many markets.

“The parallel supply of hotel rooms by unregulated and unauthorised players has also hit occupancies for the branded segment in Bangalore, Delhi-NCR and Pune,” he said adding the high pricing by hotels has driven away business from IT/ITeS companies who have started making hotel accommodations within their own campuses to beat the crunch.

HVS believes that at least 3,000 to 3,500 such rooms have come up in the past two years in cities like Bangalore, Delhi-NCR and Pune.

According to a study by HVS, hotels will not be able to push up rates between October and March and, instead, they will have to boost occupancy levels.

Thadani also added that “It is likely that by the year-end, it would be a mere single-digit gain in rates across cities and occupancy drops will vary from 5% to 10% in most markets.”

It will be very difficult for hotels to increase rates with new supply entering, a price correction is inevitable, he added.

According to the report, currently, hotels charge rates that are 50% to 75% higher of what their global average brand rates. If the trend continues, India is at a risk of out-pricing itself and losing its edge.

k_sobia@dnaindia.net