Growth may remain muted for Indian hotel industry: ICRA

Last Updated: Sun, Feb 10, 2013 09:48 hrs

The Indian hotel industry is likely to witness only a marginal revenue growth of about seven per cent in 2012-13 with uncertain economy impacting demand, according to a study by rating agency ICRA.

"Visibility on the immediate term growth remains clouded with an uncertain economy impacting demand even as lumpy supply additions occur. ICRA revises downwards the revenue growth estimates to 5-7 per cent, with a seasonally stronger second half partly compensating for the low operating margins in the first half," says the report.

It further says that hotel industry hit new lows during the second quarter of 2012-13 with falling revenue per available room (RevPARs) and escalating power costs eroding operating margins, which coupled with increase in fixed costs (interest and depreciation) resulted in many players posting net losses.

World Tourism Organisation UNWTO projects a moderate 2-4 per cent growth in international tourist volumes this year in view of the continued global uncertainties in Europe, it says.

In 2012 calender year, global tourist volumes are estimated to have grown by a modest 3-4 per cent compared to 5.9 per cent in 2011.

Foreign tourist arrivals (FTAs) to India grew by a marginal 5.4 per cent in CY2012 at 66.5 lakh travellers.

ICRA says the growth trajectory had slowed down sharply from that of the previous two years - CY2010 and CY2011, respectively.

Overall, it does not anticipate decline in demand for the fiscal 2012-13, however, growth is expected to be subdued at 5-6 per cent.

"Although there has been some easing in the global economic scenario since our last report in October 2012, with some immediate term respite from the postponement of the US fiscal cliff and the European debt crisis, there continue to be several dark clouds in the horizon driving down global consumer confidence," it points out.

The domestic situation has been largely stable, while the rate cut, reforms and some healthy corporate numbers in Q3, 2012-13 promise some respite in the near term, the ICRA report adds.

According to the report, significant supply addition is expected across key markets in India during 2012-13, particularly in Chennai and the National Capital Region.

Supply addition in 2013-14 is also expected to be robust, which coupled with muted demand is expected to lead to continued pricing pressure in the next fiscal.

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