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Even as the premium end of the hospitality sector struggles with low occupancy rates, industry players feel the need to enhance room capacity. New rooms are needed to attract foreign tourists and cater to the growing domestic tourism segment.
“An estimated 1.8 lakh guestrooms need to be added to the present inventory in the organised sector and 25 lakh in the unorganised sector. Last year, about 6.29 million foreign tourists visited India. For the next five years, we will need to increase inventory to meet the growing demand from overseas and domestic tourists,” said Kamlesh Barot, President of Federation of Hotels and Restaurants Association of India (FHRAI). The federation is the apex body for the hotel and restaurant industry in India. It has members from over 2,300 hotels and 1,178 restaurants.
Foreign arrivals
The Ministry of Tourism aims to increase the foreign tourist arrivals to 11 million by 2016, along with 1,496 million domestic tourist visits.
However, while domestic tourism has been robust, hotels have seen a fall in occupancy rates. This is largely due to over-supply of rooms at certain key sectors and also the result of foreign tourists opting for cheaper lodgings, according to analysts. Hotels across the country reported a drop in occupancy rates from 66.8 per cent to 62.1 per cent by December 2011.
Despite this, industry players remain upbeat about the sector’s growth. “The demand is high in cities such as Mumbai and Chennai. However, certain pockets in the country such as Pune, Bangalore and Delhi have seen oversupply of rooms because of which there has been a drop in occupancy rates,” said Barot.
Profitability
Meanwhile, in its recent industry report, Crisil Research said that profitability of premium hotels (5-star and 5-star deluxe) is expected to plunge in 2012-13 and 2013-14. “Occupancy rates of premium hotels will fall from 64 per cent in 2011-12 to 56 per cent in 2013-14 due to large scale room additions and global economic slowdown. Operating margins will drop to just over 16 per cent in 2013-14, the lowest in 10 years,” the report added.
nivedita.ganguly@thehindu.co.in
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