Goa Star Performer Of Indian Hotel Market: Jones Lang LaSalle

Goa's hotel market was boosted to the position of star performer in India for 2002 thanks to a recovery in demand from international and domestic visitors during the fourth quarter.

The findings form part of Jones Lang LaSalle Hotels' recently released Digest Asia, which provides an overview of India's major hotel markets.

Increased demand boosted occupancies within Goa's five star deluxe and five star sectors by 20.9 per cent and 15.9 per cent respectively to 57.9 per cent and 59.9 per cent. Although these results came at the cost of average daily rate (ADR), particularly in the five star sector, revenue per available room (RevPAR) recorded growth of 18.8 per cent and 0.3 per cent to record Rs 2,541 and Rs1,078.

Goa's tourism market witnessed a remarkable recovery in visitors from the United Kingdom, Germany and Switzerland, as well as chartered flight arrivals from the previously untapped markets of Russia and the Middle East during the December quarter of 2002.

According to Mr Scott Hetherington, Managing Director, Jones Lang LaSalle Hotels "Throughout India, a revival of international arrivals (17.7 per cent) was recorded in fourth quarter of 2002 compared to the same previous period.

Traditionally the country's peak period, hotel markets suffered during December quarter 2001 due to the drop in international demand following September 11." The results are an encouraging end to a year in which India's tourism market was adversely affected by its perceived proximity to Afghanistan, the possibility of military conflict between India and Pakistan and the related travel advisories issued by key source markets between April and August.

An overall decline in economic growth also impacted domestic corporate hotel demand, particularly in the markets of Delhi and Chennai. The growth of the Information Technology (IT) sector was the exception to the rule, improving hotel demand in Bangalore, India's IT hub, towards the end of the year. Given the expectation for strong growth in this sector, this trend is likely to continue.

Anecdotal evidence suggests performance during first quarter 2003 was positive as demand picked up in Delhi, Chennai and Bangalore. However, the war in Iraq and SARS have had their effect on hotel occupancy during April. "As April is the commencement of the off season for international tourists, the hotels are somewhat cushioned from a decline in inbound arrivals. Performance will also be buoyed by a solid domestic market, albeit lower yielding than the inbound sector" said Yeshwant Nadkarni, Associate, Jones Lang LaSalle Hotels.

Hotel trading performance in Chennai and Bangalore will also benefit from limited new supply entering these markets over the short to medium term.

"Mumbai is the only market expected to see supply growth over the short term with an estimated 1,368 rooms coming on line in 2003 and 2004. As a result, hotel trading performance is expected to be under downward pressure over the next couple of years" said Mr Nadkarni.

A planned upgrade of Goa's international airport, to include a capacity increase, is likely to boost international arrivals in the medium term. In the long term, the development of an international airport to service Bangalore is expected to stimulate increased international demand upon its completion by 2006.

The Asia Digest reports India witnessed an active domestic hotel investment market during 2002 with nine properties totalling 2,288 rooms changing hands. The transactions were a result of a disinvestment programme spearheaded by the Indian government, with the exception of the Regent Mumbai. The majority of purchasers were domestic owner operators and property investors.

"We do not envisage this level of activity to continue in 2003, given that the majority of government owned hotels were sold during 2002. Hotel owners are more likely to hold on to these assets, positioning themselves to reap the benefits of an upturn" said Mr Hetherington.