Amid economic slowdown over supply hits hotel occupancy

Branded hotels are gasping for breath just like the economy—a sense of despair hangs over their lobbies, coffee shops and restaurants as hotel occupancy levels crashed to a decade low this year.

More than a third of hotel rooms remain unoccupied, with the industry reporting an occupancy level of 60% this year. In the last four to six months alone, occupancy levels at hotels in the metros have dropped by a tenth, says Dinesh Khanna, executive director atEastern International Hotels, which owns the Novotel in Juhu. To mitigate this growing crisis, hotels have had to reduce room rates by 15%, squeezing margins like never before, even as they continue to bleed at their restaurants and conference facilities.

“You can sense it in the coffee shops and fine-dining restaurants where tables remain vacant and in the evenings when half of hotel rooms don’t switch on the lights. Companies have cut down on their executives’ travel expenses and their spending on conferences and seminars.

At the same time, executives have cut down on their food and recreation expenses,” says Siddharth Thaker, managing partner at hotel consultancy Prognosis Global Consulting.

“Hotels have been aggressively pushing us for more business in this market. This is a far cry from a couple of years ago when we used to press them for business,” says Arjun Sharma, managing director of tour operator TUI India.

What is ailing hotels across markets is a 40% increase in the supply of rooms while demand has grown only 15%. Consequently, occupancy levels have dropped and hotels rates are down 30% in the last four years.

“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.

According to a recent report by the Federation of Hotel and Restaurant Associations of India, hotel occupancies in 2012-13 dropped to the lowest in a decade at 58.3% and average room rates slumped to Rs 6,214, the lowest in six years, smelling trouble for the hotel industry.

Share this post

Leave a Reply

Your email address will not be published.

scroll to top