Economic slowdown has far reaching consequences.
Gloomy conditions in the West have curbed frequent travel to Bangalore and as a result, the Average Room Rate (ARR) in the city’s premium hotels has been projected to be Rs 7,700 (2012-13) from as high as Rs 14,300 in 2006-07. According to a report by market research firm, Crisil, profitability of Indian premium (5 star and above) hotels is likely to drop to a 10-year low in the upcoming fiscal. The firm also said that operating margins would be around 16 per cent as against 24 per cent in the last fiscal in 12 major cities of the country, which account for 80 per cent of the India’s premium rooms.
According to the report, the occupancy rate in the city has dropped from a high of 77.5 per cent in 2004-05 to 67.5 percent in 2011-12 and is said to dip further to 62 per cent in the current fiscal. Binaifer Jehani, director, CRISIL Research, attributed this to the addition of 14,500 new rooms in the current fiscal, to the existing 46,200 rooms. Bangalore has seen a fall by over 15 per cent, Jehani said, adding that the market could be heading further low until 2015.
“Supply has overshot demand,” she added.
Bhavana Shah of The Leela Palace hotel said that they had seen a dip of two per cent in the quarter (June-August), but this was due to the opening of four new hotels in the segment. “Most of our guests are top managers and it is inevitable for them to travel,” she said. “Its mostly the travel of mid-level management that has come down,” she observed. But the Leela Palace, she claims, has averaged an ARR of Rs 11,000 and an occupancy rate of 75 per cent.
Meanwhile, representatives of the IT sector told Express that travel plans by many of their executives have been put on hold due to the slowdown.
“We encourage employees to communicate with their counterparts in other countries and avoid travel. Only if it is inevitable, do we ask them to travel from other locations to Bangalore and vice-versa,” they said.