Hotel industry does not face the threat of overcapacity situation

Indian hotel majors are comfortably placed in terms of revenue growth

Travel News
Travel News

Indian hotel companies have finally managed to check into the growth phase. With the completion of expansion activities, reduction in interest outgo, because of debt repayments, and successful fund-raising programmes, Indian hotel majors are comfortably placed in terms of revenue growth.

Added to this is a surge in foreign tourist arrivals, up 8% in July-August 2011. According to the latest data from the ministry of tourism, foreign exchange earnings in July-August 2011 have risen 27% to Rs12,850 crore compared with Rs10,064 crore in the year-ago period.

As per a report in ET by Rajesh Naidu, even though most premium hotels have completed their expansion and rebranding plans, the industry does not face the threat of overcapacity situation. Indian Hotels Company, one of the largest players in the industry, recently completed the rebranding exercise by restricting its presence to a fewer brands namely Vivanta by Taj, Gateway and its budget hotel brand Ginger.

The company also took steps to lower its debt and interest outgo by raising funds through a preference share issue to its holding company Tata Sons. Another major player in the Indian market, East India Hotels (EIH) came out with a rights issue of Rs 2,000 crore. The exercise helped the company, which derives over 70% of its revenues from foreign tourists, to substantially lower its debt burden.

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