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Nina Varghese

Analysing the impact of 9/11, the reports shows that war-like condition and terrorist events specific to India had a greater impact on the industry than did the events of 9/11 and thereafter. The results of the report were drawn from the performance of quality hotels in the four metros and Goa.

CHENNAI, May 9

THE hotel industry has seen somewhat declining fortunes since the high of the mid-1990s, when both occupancies and rates were at their highest-ever. The extreme performance of that time fuelled a development boom that is in evidence even today with new hotels being created across the entire quality spectrum.

Pannel Kerr Forster (PKF), a global consulting firm, has come out with a Special India report to assess the impact of global security environment on the hotel industry in India and is based on a survey conducted in key hotel markets across India.

The report points out that there has been declining demand due to weakened economies across the world, more particularly in India, and this together with the new supply has brought considerable pressure on the performance of individual hotels and of the industry as a whole.

Analysing the impact of 9/11, the reports shows that war-like condition and terrorist events specific to India had a greater impact on the industry than did the events of 9/11 and thereafter. The results of the report were drawn from the performance of quality hotels in the four metros of Delhi, Mumbai, Bangalore, Chennai and the predominant resort location of Goa.

The jolt that the Indian hotel industry received from 9/11 sent occupancy levels down by almost 50 per cent. Yet occupancy levels began to rise almost immediately from October and continued to build through the first quarter of 2002, even though they did not reach 2001 level till April 2002. Soon, however, fears of conflict with Pakistan in May 2002 and travel advisories issued in leading source markets dealt a blow and occupancies fell once again. In New Delhi, occupancy level during June 2002 plummeted to 30 per cent.

While the impact across markets was varied occupancies recovered strongly after August 2002 and have remained on a strong path since then. Average occupancy in 2002 at quality hotels across key markets in India rose by 4 percentage points to 60.1 per cent from 56.2 per cent in 2001.

In terms of room nights sold, demand for quality hotel rooms across India showed strong growth, with rooms sold increasing by 10 per cent over 2001. While occupancy levels increased in all key markets, Bangalore witnessed the highest growth, despite a substantial increase in supply. Even Goa, a leisure destination dependent on international visitors, witnessed growth.

Average room rates (ARR) have been sliding in India since the mid-1990s. The report said that the fact that room rates in 2003 have consistently remained lower than 2001 level indicates that the pressure to maintain and build occupancies in these adverse market conditions has forced additional discounting.

The average achieved rate of quality hotels across key markets in India was Rs 4,043 in 2002 down from Rs 4,465 in 2001 - a fall of 9.5 per cent.

Unlike occupancy, the decline in ARR has seen no exceptions in the metro markets. Mumbai was the worst affected market with ARR declining 15 per cent in just one year.

Bangalore was the least affected market with a decline in ARR of 2 per cent.

The report said that revenue per available room (RevPAR) across key markets saw a decline throughout 2001, as well as in the first half of 2002.

While RevPAR has shown a growth in the latter half of 2002, this is in fact an illusory gain, for 2001 the RevPAR levels were the lowest in the past five years.

RevPAR among the quality hotels in these key markets was Rs 2,433 for 2002 down 2.9 per cent from Rs 2,506 in 2001. Bangalore topped the charts in terms of RevPAR growth, followed by Goa.

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