Hotel ARRS to improve by 2013
In the recently released report titled ‘Indian Hospitality Story 2012 & Beyond’ conducted jointly by CII and Cushman & Wakefield (C&W), Average Room Rates (ARRS) are expected to improve in the next 12-18 months on account of stability in economy and expec
It’s
challenging to keep average occupancy rates (AOR) increasing along with average room rates (ARR) in a market that’s consistently witnessing increase in supply. In fact, in many of the popular destinations, there was a decline in AOR, primarily, due to addition of supply in major cities in H1 2012. However, the said report also bestows hope of increase in ARR.
According to the report, the top six cities witnessed an average occupancy of 58 per cent with an Average Room Rate (ARR) of INR 5,400 in H1 2012. The current average records a marginal decline of 4 per cent in AOR and 5 per cent in ARR over the average of 2011 (full year) performance. Chennai recorded the highest AOR of 64 per cent for H1 2012, followed by Mumbai (61 per cent) and Kolkata (60 per cent).
All the cities witnessed only a marginal drop in AOR when compared to the previous year 2011, while Mumbai and Kolkata saw the maximum dip in AOR. The decline in AOR in popular destinations was due to a number of factors but primarily due to addition of supply in major cities in H1 2012. On the ARR front in H1- 2012, Mumbai recorded the highest ARR of 6,400, followed by NCR 6,280 and Bengaluru
4,915. While Chennai and Hyderabad witnessed marginal increase in ARR, all other cities saw the rates as either stable or softening over 2011.
But, going forward, Akshay Kulkarni, Regional Director – Hospitality, South and South East Asia, Cushman & Wakefield is hopeful that ARRs will improve.
“Occupancy rates may see an upward trend in the second half of 2012 keeping ARRs steady. keep the rates at modest levels across the country. However, going forward, we expect ARRs to improve in the next 12-18 months on account of stability in economy and expected growth in tourism in India. Also, with more and more international brands operating in the country, the market will move towards being more organised and standardisation of process including cost per room night,” said Kulkarni.
“Further, on back of interest from a variety of segments ranging from MICE, Wellness Tourism, Spiritual & Pilgrimage Tourism, apart from the traditional business or leisure travel, the top six cities of India are expected to see a total of 50,000 new hotel rooms across categories in the next 5- 6 years. This is in response to the steady growth the hospitality sector has recorded over the last few years. 2012 alone is expected to see 14,800 fresh keys by the end of the year. Out of the total expected supply for 2012, 2000 new hotel rooms have already entered the market,” he added.