Hotels readying to make merry again

Hotels readying to make merry again

With international and domestic tourist flows down to trickle, hotel industry in India was hardpressed to find ways and means to win back tourists. Succinctly capturing the problems of the hospitality sector is Ficci Survey on Hotel Industry Slowdown-Impact-Efforts-Result: Putting the tourism downturn behind.

With the dawn of 2010, according to the Ficci survey, majority across all categories of hotel segment believe that country’s current overall economic conditions are better and an upturn has began. With over 500 million strong domestic tourists and 5.43 million foreign tourists coming to India in 2008-09, efforts are on to win back both, lost over the last two years.

Flexible approach

Among strategies being adopted by hotels to bolster business, finds the survey, is that while two and three star ones are focusing on larger volumes in near term, higher segment hotels are also aiming for higher  F&B sales and room sales. Furthermore, specific gameplan being adopted is to ramp up business performance through improving room sales by high-end hotels focusing on corporate and business travellers, simultaneously offering special packages for weekend/MICE (Meetings, Incentives, Convention & Exhibition) categories. Budget hotels focusing on leisure travel such as backpackers and families.

Likewise, the hotels are taking to dynamic pricing to garner ad hoc business, entering into strategic tie-ups with travel portals and global distribution system. Hosting food festivals, adding on new restaurants, attractive rates for regular clients to solicit their continued patronage, are other efforts by the industry. To get more of inbound tourists hotels are working with tour operators.

Action agenda

As part of larger action agenda and ‘Operation Turnaround’, the sector has called upon the Centre to bestow it with infrastructure status and export status to tourism sector, besides providing service tax exemption on foreign exchange earnings. Industry’s wishlist includes single window clearance for hotel projects, rationalisation of taxes, uniformity in tax structures., availability of land at subsidised rates; greater incentives for setting up of budget hotels, etc.

Ther biggest problem was empty rooms.  Poor occupancy levels, says the survey, among majority of five star and five star deluxe hotels went for a six hovering around 50 to 75 per cent over last six months of year 2009.

The three and four star category ones were even worse hit, reporting only 25 to 50 per cent, while, most languishing among them being two star category with almost 43 per cent of them reporting less than 25 per cent. Thanks to the business traveller, standalone business hotels saw occupancy of 50-75 per cent, while those of standalone leisure category and those catering to both leisure and business segments were left twiddling their fingers for better days to come.

Period of uncertainty

However, on performance of the industry, it’s a divided house, with 39 per cent saying it is moderately better, while 32 per cent maintained there is no change and only 10 per cent averring that it’s worse. Going forward, while 76 per cent maintain that industry’s performance in coming months would improve, the rest think uncertainty is not yet over for them. Among two star hotels it was near unanimous that their performance over last six months has worsened slightly.

Among three star category it was moderately better while four star stated it was same with five star and five star deluxe players terming it moderate. The survey capturing the sense of nervousness that still lurks with sectoral players notes that while two stars believed it would be same situation six months looking forward, other star category hotels unanimously felt it would only improve for the better fairly reflecting buoyant mood amongst members of hotel industry.      

Their optimism is not farfetched in that global economy is showing signs of improvement, foreign tourist arrivals are picking up, specially business travels. Likewise, domestic corporate travel is also showing signs of revival. But, for budget hotels of two and three star categories, it’s still wait and watch for their performances largely is incumbent upon domestic tourists as also different segment of income earning foreign tourist class, whose flows are still limited and take much more time to spurt. With concerns about employment prospects and job security still looming large, many casual, leisure and holiday travellers have cut down their discretionary spending, including travel.  

In recent past, hoteliers are expecting moderate business in next six months. Nearly 92 per cent giving thumbs up thanks to corporate travel and MICE witnessing renewed activity. The leisure segment is seen still dogged by sluggishness with both inbound foreign and domestic leisure tourist traffic taking time to pick up.

That there is a semblence of turnaround, says the survey, is reflected by the fact that five and five star deluxe category hotels have reported improvements over last six months.
While 40 per cent of five star hotels have seen their bottomlines improving, it’s whopping 85 per cent among five star deluxe segment over last two quarters. But for three and four star segments it has remained stagnant and for majority of two stars revenues remained low.  

Expectations over next months, are however, running high with nearly 74 per cent stating revenues may improve considerably, while 93 per cent of five star deluxe category agreeing that revenues would improve in next six months. The same optimism prevades among others as well with 73 per cent among five star; 77 per cent among four star; 72 per cent among three star and only 46 per cent among two star are positive on future prospects. Will the sector see fair winds blowing its way? The next quarter should provide the big picture. For now though, hospitality’s hopes hang in fine balance on the belief that travel and tourism would spring back to life and the sector its ambrosia for survival and success.   

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