Hotels Riding High On 1st Quarter

If the financial year 2003-2004 ended on a positive note, hotel pundits have predicted that 2004-05 will be a whopping success. The results so far have borne this out. Mahesh Tharani highlights the industry’s performance for First Quarter 2004-05...

The hospitalityindustry in Indiain 2003-04 walked on a path of resurgence after the tumultuous years of 2001-02 and 2002-03 which saw disasters like 9/11, SARS epidemic leading to a worldwide instability.SSMukherji, vice-chairman and managing director, East India Hotels (EIH) Limited, owners of the Oberoi Hotels and Resorts, says the period of trouble didn’t let up until around October 2003. He says, “After the 9/11 attacks, there were a spate of problems all around the world. And in Asia specifically with the SARS epidemic in South East Asia, the Kargil war and various terrorist attacks in India. But by October 2003 things began picking up in the hospitality industry.” He attributed it to factors like more foreign tourist arrivals plus increasing business and leisure traffic. By the first quarter of 2004, recovery was complete and the bottomline was showing steady increase.

First Quarter Results

“In the hospitality industry circle, the first quarter is considered to be the worst. And figures of different hotels undoudtedly showcase that there has been a desirable growth in the first three months indicating that the industry is doing well,” stated Homi Aibara, partner, Mahajan & Aibara Management Consultancy Division.

In the first quarter the months of April of 2004-05, Hotel Leelaventure Limited had a rise in GOP from Rs 7.34 crore for Q1 (First Quarter) to Rs 22.06 crore for Q1 of 2003-04, an increase of Rs 14.72 crore. The net profit was Rs 0.38 crore for 2004-05 as compared to the net loss of Rs 15.88 crore for the quarter 2003-04. According to Peter J Lietgeb, president, The Leela Palaces & Resorts, “Everything looks good the revenues are up.”

Showing an upward trend for the first quarter of 2004-05, the Bharat Hotels Ltd, owners and operators of Grand Group of Hotels registered a GOP of Rs 6.65 crore in Q1 of 2004-05 as compared to Rs 0.6 crore for the first quarter 2003-04. An increase of Rs 6.05 crore.

Similarly, EIH has shown a GOP of Rs 23.34 crore for the first quarter 2004-05 as compared to Rs 12.37 of Q1 2003-04, an increase of Rs 10.97 crore. However while the GOP had increased, the company registered a net loss of Rs 3.82 crore for the current quarter. The net loss registered in the first quarter of 2003-04 was Rs 4.9 crore.

The IHCL owners of the Taj Hotels, Resorts and Palaces registered a GOP of Rs 29.8 crore for Q1 2004-05 as compared to Rs 23 crore for Q1 of 2003-04, an increase of Rs 6.8 crore. The net profit was Rs 6.4 crore for the first quarter of year 2004-05 as compared to Rs 3.76 crore for the first quarter of year 2003-04, an increase of Rs 2.64.

The ITC Hotels registered a net profit of Rs 461.99 crore for the first quarter 2004-05 when compared to Rs 397.22 crore for the Q1 2003-04, an increase of Rs 64.77 crore. The GOP for the first quarter of the year 2004-05 was Rs 755.34 crore when compared to Rs 669.01 crore, an increase of Rs 86.33.

Drivers Of The Profit Vehicle

“A recent study indicated that growth in hotel room supply roughly mirrored the growth in Gross Domestic Product (GDP),” informs Aibara. According to the study, even at a conservative GDP growth assumption, the current room supply of approximately 90,000 rooms would need to increase to at least 1,30,000 rooms by 2008 to service growth even at minimum levels.

With foreign tourist inflow into the country having crossed the 30 lakh mark during the year and India has made it to the top 10 list of travel and tourism economies. The numbers of tourists to India are growing and the surgence of the domestic tourist market is an indicator to the growing occupancy levels in most hotels. EIH Limited has shown a growth of seven per cent in its occupancy with the Average Room Rate (ARR) having increased by 13 per cent as compared to the first quarter last year, translating to an increase in profitability by 60 per cent for the group.

IHCL has also shown an increase in occupancy by seven per cent. And the ARR has increased by 18 per cent over the same quarter in the previous year ending 2003-2004 giving the group a rise in profitability by 30 per cent over the previous financial year.

According to Sundar Advani, chairman and managing director, Advani Hotels & Resorts (India) Ltd, “The bumper year all over India has been because of the economy doing better, this has helped occupancy rates.”

What Does The Future Hold

Growth is here to stay, predict the industry vetereans and the current booking charts of the second quarter indicates that the coming months will be good for most of the hotel chains. Thus, the hotel industry is very bullish about the future trends and growth is expected to continue uninterrupted.

“Since quarter one has been good, there isn’t anything else but sheer optimism, the growth has to be stronger,” says Aibara. The winters look set for a good period.

“Winters will be packed and India still has a shortage of rooms. November and February should be the best months with a minimum of 90 per cent occupancies,” says Mukherji.

Soumitra Saha, director of finance, Grand Hyatt Mumbai, the recently launched hotel property says, “The market should grow by atleast 20 per cent at a reasonable estimate.”

With expansion plans beginning on a war-footing by Carlson Hospitality, IHCL, Kamats Hotels India Ltd, Sarovar Park, Appu Hotels and EIH Ltd expanding into various sectors and especially in the smaller towns of India the future seems bright.

Cities Of Bright Future

Whitefield Road near the Information Technology Park (ITPL) in Bangalore seems to be the hottest address for the hospitality industry. Since the setting up of the indiOne property a few months ago, Sarovar Park Plaza Hotels Limited and Carlson Hospitality have announced the launch of their properties in the area. “Bangalore has done well, it did well last year and it has done better this year, everything looks good there,” says Aibara. Mumbai will continue to witness an increase in the numbers of rooms and as demand conitues to grow steadily. Cities like Pune, Kolkata, Hyderabad, Chennai and Kumarakom have also observed a spurt in hotels.

Conclusion

After a long time the industry is upbeat about its future prospects as indicated by the results of the Q1 of 2004-05. Many hoteliers are working aggressively towards meeting the growing demand and setting high measures to service its clients in each sector. Smaller cities and towns across India are the new pet focus of hoteliers. And with religious, medical, ecology and wildlife tourism growing extensively, the growth of mid-sized hotels will also be evident. All that the sector would need is a little bit of peace.