Occupancy levels in India’s premium hotels are expected to remain flat in the peak season for the industry unless the US and European countries recover from economic turbulence, .

“The US and Europe are two major markets accounting for 60% of the international feed market,” Nakul Anand, executive director, ITC Ltd, said in Chennai.

The company, which recently inaugurated the 600-room ITC Grand Chola luxury hotel built on more than 1.5 million sq. ft of land in Chennai involving an investment of Rs.1,200 crore, recorded a 65% fall in pre-tax profit at Rs.15.3 crore for the quarter ended 30 September, for its hotel segment, as compared to a year-ago period.

Consolidated net profit for ITC Ltd stood at Rs.1,836.4 crore, up 21.2% from a year earlier. ITC’s hotel segment was impacted by “weak economic conditions” in countries from which ITC’s hotels receive guests and by the addition in capacity in key Indian cities, the company had said in its statement,as per a report in mint.

According to industry estimates, in 2011-12, room demand grew at around 4% compared with around 6% growth in supply across the mid-market and premium segments in India.

“Even in the peak season for the hospitality industry (October-March), no uptick in occupancy or room rates is expected.” The hospitality industry has been going through tough times as occupancy levels have been flat at 60% while costs—food, beverages and staff—have gone up in the last two years. Asked about the pressure on operating margins, Anand said:

“We have learnt to manage cost better given the cyclical nature of our business with the use of technology.” Despite staff cost doubling in the last two to three years, the room to manpower ratio has come down, he said without giving details. “As long as the global environment does not get better, the situation will not change.

India’s second largest hotel chain has an ambitious plan to add 5,000 rooms in the next five to seven years to its existing 8,000 rooms. The company will set up two hotels overseas—one in Colombo and the other in Nepal.

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