Slowing economy hits hospitality industry

Close to 75 branded hotels across the country, of a total of 550, are on the block

Travel News
Travel News

The hospitality industry is becoming another high-profile casualty of the slowing economy, with nearly 75 big hotels putting up the 'for sale' boards and several others raising the red flag amid falling check-ins and wilting room rates. 

Most hotels in the country are running half empty, as the GDP growth slips to 5% levels this fiscal year, says the Federation of Hotel and Restaurant Associations of India (FHRAI). In a preliminary report, the hoteliers' body has found that average hotel occupancy in 2012-13 dropped to the lowest in a decade at 58.3% and average room rates fell to Rs 6,214, the lowest in six years. 

Hotel occupancies had reached a high of 71.5% in 2005-06 growing from 64.8% in 2003-04. Average room rates peaked at Rs 7,989 in 2007-08. It was Rs 3,569 in 2003-04. 

The scary turn of events has sent hoteliers scurrying for cover, with disinvestments or restructuring becoming the buzzwords for an industry, which only five-six years ago was charting a decade of boom as per an ET report. 

"Close to 75 branded hotels across the country, of a total of 550, are on the block," says Kaushik Varadharajan, managing director at HVS India, a hotel consultancy. Another source, who asked not to be identified, said among the hotels on the block include the 386-room Shangri La in Mumbai, the 114-room Hilton Garden Inn at Saket in Delhi, the 171-keys Hilton Mumbai, the 305-room Novotel Hyderabad airport hotel and the 320-room Grand Hyatt in Pune. Other properties sporting "For Sale" signs include the Novotel in Ahmedabad, theBest Western in Delhi's Shahdara area, the Sheraton in Chandigarh and the entire portfolio of Royal Orchid Hotels officials and hospitality industry experts say. 

Some deals have already happened. Royal Orchid sold its hotel in Ahmedabad to institutional investor Samhi Hotels. The promoters of Ista hotels decided to sell stake to an NRI investor and rebrand to Hyatt to improve sales, marketing and distribution capabilities.

Real estate firms like DLF, Parsvnath and Emaar-MGF, which had announced large hospitality plans some years ago, have now junked them altogether and have been selling their land parcels. DLF recently sold four hotel lands. Emaar too is trying to sell its land parcels.

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