With a slowing economy, drop in corporate travel and a large supply of new rooms, hotels in India's top metro cities have seen a 10-15% drop in occupancy since the beginning of the year. Occupancy levels in hotels in Delhi, Mumbai, Bangalore and Chennai currently stand under 60%.
What is making the situation more alarming is that in a double whammy room rates too have dropped 15% in this period. “Our economy has slowed, Europe has slowed and everyone is now competing for the same pie. Occupancy for city hotels in Mumbai are down 10%,” says Dinesh Khanna, executive director at Eastern International Hotels, which owns the Novotel in Juhu.
While supply of hotels rooms have increased by about 40% in the last four years, demand for rooms has grown only 15%. Consequently, occupancy levels have dropped and hotels rates are down 30% in the last four years.
In Delhi, for Le Meridien, this June was one of the worst with occupancy dropping 15% over last year and average room rates falling 20%. “Room rates and occupancies are closely linked and a combination of dropping rates and dropping occupancy is lethal,” says Tarun Thakral, chief executive officer of the hotel.
In 2012-13 alone, close to 12,782 new rooms were added across the country, taking the total supply of branded hotel rooms up to 96,000. India is expected to add another 54,000 hotel rooms over the next three to four years, says hotelconsultancy HVS. NCR and Chennai have both seen a large amount of new room inventory come in. In 2012, about 1,200 rooms became operational in Delhi-NCR, 800 in Mumbai, 1,300 in Bangalore and 800 in Chennai impacting occupancy levels.
Add to that the decline in corporate traffic from the Eurozone and the US in the last 8-12 months. “Corporates are even asking executives to cut down on domestic trips. Even if one has to go, they advice them to take the evening flight back to reduce hotel stays,” says Geeta Jain, chief executive officer (CEO) at travel management company Carlson Wagonlit India.
Corporate travel had been hit considerably in 2008-09 but had bounced back in 2010 and 2011. While the reality of the situation is not lost on any of the hotels, some are trying to hold on to their occupancy levels by slashing prices. “It is clear that demand is weakening across India. When demand drops, hotels start acting irrationally and drop prices. Each starts going after the others business,” says Patu Keswani, managing director of Lemon Tree Hotels.
Source: The Economic Times
By: RAVI TEJA SHARMA & DIVYA SATHYANARAYANAN
What is making the situation more alarming is that in a double whammy room rates too have dropped 15% in this period. “Our economy has slowed, Europe has slowed and everyone is now competing for the same pie. Occupancy for city hotels in Mumbai are down 10%,” says Dinesh Khanna, executive director at Eastern International Hotels, which owns the Novotel in Juhu.
While supply of hotels rooms have increased by about 40% in the last four years, demand for rooms has grown only 15%. Consequently, occupancy levels have dropped and hotels rates are down 30% in the last four years.
In Delhi, for Le Meridien, this June was one of the worst with occupancy dropping 15% over last year and average room rates falling 20%. “Room rates and occupancies are closely linked and a combination of dropping rates and dropping occupancy is lethal,” says Tarun Thakral, chief executive officer of the hotel.
In 2012-13 alone, close to 12,782 new rooms were added across the country, taking the total supply of branded hotel rooms up to 96,000. India is expected to add another 54,000 hotel rooms over the next three to four years, says hotelconsultancy HVS. NCR and Chennai have both seen a large amount of new room inventory come in. In 2012, about 1,200 rooms became operational in Delhi-NCR, 800 in Mumbai, 1,300 in Bangalore and 800 in Chennai impacting occupancy levels.
Add to that the decline in corporate traffic from the Eurozone and the US in the last 8-12 months. “Corporates are even asking executives to cut down on domestic trips. Even if one has to go, they advice them to take the evening flight back to reduce hotel stays,” says Geeta Jain, chief executive officer (CEO) at travel management company Carlson Wagonlit India.
Corporate travel had been hit considerably in 2008-09 but had bounced back in 2010 and 2011. While the reality of the situation is not lost on any of the hotels, some are trying to hold on to their occupancy levels by slashing prices. “It is clear that demand is weakening across India. When demand drops, hotels start acting irrationally and drop prices. Each starts going after the others business,” says Patu Keswani, managing director of Lemon Tree Hotels.
Source: The Economic Times
By: RAVI TEJA SHARMA & DIVYA SATHYANARAYANAN
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