Budget hotels beat 5-star peers in revenue growth
It is not the four- and five-star hotels that are clocking the highest growth in revenue per available room (RevPAR), even as the hospitality sector has started showing signs of a turnaround. The two- and threestar hotels are seeing a stronger growth in RevPAR, thanks to a rise in travel in Tier-II and-III cities and towns and the expansion of budget hotel brands.
The data collated by hospitality consulting firm Hotelivate, by analysing over a 1,000 domestic hotels, shows how three-star hotels saw the highest RevPAR growth of 8.2 percentamong allsegmentsin 2017-18 (FY18). The two-star hotels registered a RevPAR growth of 7 per cent. However, growth in case of four- and five-star hotels was lower at 5.9 and 5.7 per cent, respectively, according to a report released by the consulting firm last week. This is a trend reversal since RevPAR growth of twostar hotels was flat in 2016-17, while three-star hotels had reported a decline. In the same year, growth in four-star was almost 5 per cent and five-star hotels had posted an even higher growth of 15 per cent.
RevPAR is the real measure of revenue and is derived by multiplying the average rate by the per cent occupancy. The data shows the average room rate of two-star hotels increased by 8.5 per cent in FY18, even though it lagged on occupancy at 61.8 per cent, down 1.4 per cent year-onyear. Growth in the average rate of three-star hotels was 5 per cent and the segment saw an occupancy growth of 3.1 per cent to 67.2 per cent. The average rate of four- and five-star hotels increased by 3 and 1.8 per cent, respectively. The occupancy of four- and fivestar hotels grew by 2.8 per cent and 3.8 per cent to 67.8 per cent and 66.5 per cent, respectively.
Growth in two- and threestar segments can be primarily attributed to the increase in average room rates witnessed by hotels in these two categories, which clearly seized the opportunity presented by a favourable demand situation unlike their higher-positioned counterparts, Hotelivate said.