A bleak 2017, but 2018 offers hope
On the sidelines of PACE (PIHMAA Annual Conclave & Exchange) 2017, TRAVTALK finds out from prominent hoteliers in the country how the year 2017 has been so far for the industry and what they expect from the coming year.
It’s been a very difficult year for the food and beverage business, first with the liquor ban and then the uncertainty of business. Around 29 of our hotels were impacted. We had some restaurants and bars to open, but couldn’t. However, we are grateful to the Supreme Court for having amended and lifted the ban to a reasonable level. Business seems to be picking up and occupancies are better. We are seeing a positive change but more would be known during the next off-season. There is more domestic business which is happening now and I hope MICE business also improves.
All the challenges faced this year, including GST, liquor ban and demonetisation, were definitely a disruptor for us but all said and done, the industry is limping back to normalcy. A recent respite has come in the form of GST for restaurants, which could go back to 12 per cent. This will be a welcome move for the industry. If I look at the year ahead, occupancy will continue to increase and rates will continue to soar as well. The economy is slowing down; this is something we are watching very closely because our hotels, especially Radisson-branded ones, are largely dependent on corporates.
Business was majorly impacted this year. One reason was demonetisation. GST also made sure that companies postpone their plans on MICE movements and conducting conferences. Liquor ban resulted in another 3-4 month loss of business. What the government needs is to do consistent policymaking. Once we stabilise the base, things will only look positive in the next two years. We are on the right track. I see a promising November-December, the fourth quarter is showing signs of recovery. Great days are ahead as long as policymaking is consistent and we are not surprised by events like liquor ban.
There were some initial bumps and a lot of apprehension and anxiety, especially with demonetisation and GST being implemented back-toback. I think we crossed over well and are back to business. We are very optimistic from a MICE and luxury perspective. We see a significant upside because there is an ease of doing business. In 2018, we are forecasting an almost double-digit growth in terms of what we have done this year. There is a lot of transparency now and a feel-good factor of how business is conducted in India. I think it all augurs well for our business.
Overall, I have seen the rates go up, which is positive because so far the challenge was that occupancies were climbing up steadily but rates were static. There has been a 4-8 per cent growth in rates. Some hotels have even seen 10 per cent growth. Hotels that rely heavily on foreigners have done extremely well. The dollarto-rupee ratio has stayed steady, so has not affected buying patterns. A large amount of the leisure growth has come through the domestic segment. For the first time, we have seen a double-digit growth among foreign leisure tourist arrivals.
The hospitality industry has been through a terrible patch. For almost seven years we felt the stress as capacity and supply of inventory of rooms increased in almost all our key cities and demand shrunk. There's now enough evidence that the industry is perhaps at the beginning of an upcycle. Last year the occupancy level in almost all key cities went up, this is a precursor to ADRs going up. Our forecast for the industry over the next four to five years is that we are headed for a bull run. Unless something goes drastically wrong, we are confident of an upcycle.
The industry was hit by demonetisation, GST and liquor ban this year. This raised challenges for some of our hotels, especially because of the liquor ban. It impacted our F&B revenue as well as the room revenue. I don’t think demonetisation had a huge impact on hotels except in the wedding segment, but challenges bring their own opportunities and it gave us the chance to look at our cost structure. Most of the hotels did very well and came out with great results. Overall, the challenges were well handled. Despite the setbacks, most of our hotels have grown over the past months. The upcoming year, without any hiccups, looks better. We are expecting firm rates with occupancies doing relatively well. It’s all about managing better rates in 2018. Gaining guest loyalty is going to be the biggest game changer. It will include loyalty programmes, customer satisfaction, personalised services, etc. With OTAs and players such as Airbnb coming in, loyalty can be a differentiating factor. We are not competing with each other in the hotel space; we are fighting technology and other lines of business. So, what is going to really make a mark is gaining the loyalty of consumers.
The year 2017 was tough. We started with the liquor ban, then the GST. However, it’s been a year that will set us right for the future. At the end of the day, when business is tough, you have to reinvent yourself; you look at your expenses and efficiencies. I am convinced that it will be better now as we have seen that food and beverage revenue, especially in banquets, is back on track since September 2017. Also, we are looking at an increase of 10 per cent in RevPAR. I am hopeful that the last quarter will be the best in terms of revenue.
The industry faced a lot of challenges because of the liquor ban. Liquor is one of the most important components of the industry and we didn’t realise its importance until it was gone. When the liquor ban was imposed, we saw how the entire gamut of business moved around liquor and how hotels struggled. With GST, it was not very clear how it was to be implemented and till date, hotels are struggling with what’s right and what’s not. A few amendments are still awaited. Overall, we are a very resilient industry; whatever happens, we bounce back.
Michel Koopman General Manager The Leela Ambience Gurugram Hotel & Residences
K.B. Kachru Chairman Emeritus & Principal Advisor, South Asia Carlson Rezidor Hotel Group
Arindam Kunar Area General Manager, South India InterContinental Hotels Group
Anurag Bhatnagar Multi-property Vice President Luxury (India) Marriott International
Shipra Sumbly Kaul General Manager Holiday Inn Express & Suites Bengaluru Racecourse
Raj Rana South Asia Carlson Rezidor Hotel Group
Mandeep S Lamba Managing Director, India JLL Hotels and Hospitality Group
Sanjay Sethi ITC Hotels & WelcomHotels
Kapil Chopra President The Oberoi Group