Check-ins drop 10% in business hotels

Rising airfares, slowdown are forcing companies to cut travel

MUMBAI: The slowdown in some segments of the economy may be beginning to impact the hospitality industry.

Occupancy levels at hotels catering to business travellers have dropped 5-10% since January-end, with major impact seen in Bangalore and Hyderabad, analysts said.

Though industry experts dub this  a cyclical phenomenon, there are others who believe there is more to the dip than just the seasonality.

A slump in the stock markets, rising input costs and weakening dollar have led to a cut in travel and lodging costs by the companies.

And if this continues, business hotels may be in for tougher times.  May-June is a lean phase for business travel since it’s vacation time.

Awadhesh Garg of Kotak Securities Ltd, said economic activities have been on the decline since January-end.

“Due to rising costs, companies are facing pressure on their earnings; intentional cost-cutting is leading to a 5-10% drop in occupancy levels for business hotels in June,” Garg said.

Though a full-fledged slowdown has not hit India Inc yet, fears of one are impacting business, say experts.

Also, major expenditure-cutting exercises by information technology sector companies, which are hurt by rupee appreciation, have begun to impact Bangalore and Hyderabad hospitality segments.

Pradeep Kalra, senior vice president, marketing, Sarovar Hotels, said business has been affected by slowdown fears. “Another reason for the dip in occupancy is the hike is airline fares. This has impacted corporate travel.”

Chender Baljee, chairman and managing director, Royal Orchid Hotels, agrees there is a definite slowdown in occupancy levels.

“April and May saw good business but now there is a drop in bookings. Whether the slowdown is here to stay or is it just monsoon which is keeping the business travellers away will become clear in a couple of months.”

But others say there is no slowdown yet. Ketaki Narain, director, corporate communications, Oberoi Hotels, said there have been no cancellations in corporate bookings and we doubt if there has been any reduction in occupancy either. Year-on-year, the company has seen a better performance in April.”

Yet, hotels are offering various schemes to lure customers.

McEnro Samdani, analyst with Motilal Oswal Securities Ltd, said the fall in occupancy levels in the last few months has more to do with seasonality than an industry slowdown. “On a quarter-on-quarter basis, occupancy levels have fallen by 10-15%, but on a year-on-year basis they have remained flattish,” Samdani said.

The industry on the whole is doing fine, it seems.

Apart from business centres, other travel destinations are yet to bear the brunt of slowdown.

The refrain in the industry is that the dip in occupancy at business hotels is not yet a cause of worry since a 5-10% swing is not that significant. Yet, hoteliers are watchful.

“We haven’t really felt the impact but yes, we have to remain cautious” said Sarovar’s Kalra.

If occupancy levels continue to remain down for the next few months, hotel groups will have to come out with special offers and discounts for customers. A reduction in average room rents may also follow though chances for that seem bleak for now.

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