Indian hospitality posts growth in room revenues but margins contract
, ET Bureau|
Dec 12, 2017, 05.01 PM IST
The Indian hospitality industry saw an uptick in occupancies and room revenues on the back of higher foreign tourist arrivals (FTA) in Q2FY18 but witnessed contraction in margins, said ratings agency ICRA.
While pan-India revenue per available rooms (RevPAR) were up by 4-5%, occupancies moved up by 2% to 62-63% from 61% and average room rates (ARR) too witnessed a growth.
According to Subrata Ray, senior group vice-president, corporate sector ratings, ICRA, "ARRs have slowly but steadily started to improve on a pan-India basis. While most of the cities have witnessed uptick in ARRs, some cities with recent supply additions (like NCR, Bengaluru and Kolkata) witnessed only modest ARR growth".
"Going forward, we expect 2% growth in occupancies and 2-2.5% growth in ARRs, leading to 4-4.5% growth in RevPARs during FY2018. RevPAR growth is estimated to accelerate to 5%-7% during FY2019 and FY2020, driven largely by traction in ARRs," Ray said.
However, despite the steady RevPAR growth over the past three years, the current RevPAR levels (Rs 3,350 for H1 FY2018) are at 30% discount to the peak levels witnessed in H1 FY2009 while the current occupancy levels are 4% higher compared to the levels in FY2009 and the current ARRs are at 34% discount to the FY2009 levels, said ICRA.
Also, revenue growth for Q2 FY2018 for ICRA's industry sample remained subdued as some of the hotels underwent renovation.
"On an unadjusted basis, the industry revenue declined by 2.1% during the quarter (compared to flat revenue in Q2 FY2017 and 1.6% decline in Q1 FY2018). Q2 FY2018 (Y-o-Y) operating profit margins declined by 160 bps, constrained by scale, inflationary pressures and a few one-time expenses," said ray.
Meanwhile, the demand for rooms continued to remain buoyant as Foreign Tourist Arrival (FTA) growth picked up strongly to 15.6% during 10m CY2017 as compared to the 9.8% growth during 10m CY2016 coupled with higher domestic demand.
While pan-India revenue per available rooms (RevPAR) were up by 4-5%, occupancies moved up by 2% to 62-63% from 61% and average room rates (ARR) too witnessed a growth.
According to Subrata Ray, senior group vice-president, corporate sector ratings, ICRA, "ARRs have slowly but steadily started to improve on a pan-India basis. While most of the cities have witnessed uptick in ARRs, some cities with recent supply additions (like NCR, Bengaluru and Kolkata) witnessed only modest ARR growth".
"Going forward, we expect 2% growth in occupancies and 2-2.5% growth in ARRs, leading to 4-4.5% growth in RevPARs during FY2018. RevPAR growth is estimated to accelerate to 5%-7% during FY2019 and FY2020, driven largely by traction in ARRs," Ray said.
However, despite the steady RevPAR growth over the past three years, the current RevPAR levels (Rs 3,350 for H1 FY2018) are at 30% discount to the peak levels witnessed in H1 FY2009 while the current occupancy levels are 4% higher compared to the levels in FY2009 and the current ARRs are at 34% discount to the FY2009 levels, said ICRA.
Also, revenue growth for Q2 FY2018 for ICRA's industry sample remained subdued as some of the hotels underwent renovation.
"On an unadjusted basis, the industry revenue declined by 2.1% during the quarter (compared to flat revenue in Q2 FY2017 and 1.6% decline in Q1 FY2018). Q2 FY2018 (Y-o-Y) operating profit margins declined by 160 bps, constrained by scale, inflationary pressures and a few one-time expenses," said ray.
Meanwhile, the demand for rooms continued to remain buoyant as Foreign Tourist Arrival (FTA) growth picked up strongly to 15.6% during 10m CY2017 as compared to the 9.8% growth during 10m CY2016 coupled with higher domestic demand.
