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Hotels to gain from higher occupancy

Parul Gupta in New Delhi | October 11, 2003 12:36 IST

Occupancies in hotels across the six main cities are expected to rise sharply during the current financial year with Bangalore leading the way with 86 per cent occupancy compared with just 64 per cent two years back.

It is followed by Mumbai with 72 per cent occupancy despite 1,200 rooms coming into the market in the last 20 months and Delhi with 67 per cent occupancy despite over 200 rooms added in the last one year.
The only exception is Kolkata where occupancies dropped by only 4 per cent, partly because of supply increasing by over 50 per cent.

Interestingly, this upturn has not been fueled by a fall in average room rate (ARR) which in most cases is actually firming up.

Analysts say that since a hotel typically takes around 3-4 years to get operational, there's plenty of time for current hoteliers to make hay before fresh supply comes into the market.

The industry is gung-ho since occupancies are actually looking up to the 1995-97 levels, which were among the best years for the industry.

Those levels in fact prompted developers to look at new projects in several cities in India with New Delhi and Mumbai witnessing maximum development in subsequent years.

By the time these projects were executed, the hotel industry was passing through a downturn with 2001-02 being the worst year. It was only in early 2003-04 that things have started to look up in several cities.

"With most of the new supply having entered into the market, it will take another 3-4 years for developers to plan and execute additional projects based on the current buoyant market trends. We, therefore, expect cities such as Bangalore, Mumbai and Hyderabad to do exceedingly well in terms of room occupancies in the next few years," Kiran Andicot, consulting and valuation analyst, HVS International, said.

Even the current hoteliers cannot stop beaming when they talk about 100 per cent occupancies on some days. Most of them are expecting the coming winter months to see an average occupancy of over 80 per cent.

A Taj official said the hotels are choc-a-bloc on some days and on a lot of occasions, even senior officials of the Taj group are being turned away.

The trend can be seen with most of the the hotel chains including Oberoi, ITC Hotels, Radisson and Intercontinental.

Small wonder, consultants say the fresh investment will be planned for the sector. The hoteliers agree.

Bharat Hotels chairman and managing director Lalit Suri agreed things were looking optimistic after a long while and that lot of new investments will be planned.

K B Kachru, executive director, RHW Hotel Management Services, which franchises Radisson, Regent and Country Inns brand, says a couple of big investors have shown interest to get into the business and the company is considering new properties in Bangalore and Mumbai.

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