The subcontinent’s fanciest hoteliers are plumping their pillows for fewer guests as the economy takes a toll on travel.
Corporations are chopping their travel budgets. Foreign tourism isn’t what it used to be. And there was an oversupply of hotel rooms in India to begin with.
For reasons like these, hotels particularly at the higher end of the business will be facing “muted revenue growth, stagnated profitability and elevated credit risk” in the fiscal year that started April 1, a rating agency said.
Premium hotels, a category that includes five-star and four-star properties, are feeling most of the pain, according to a report from India Ratings & Research, a Fitch Ratings Inc. firm. They get about two-thirds of their business from corporate and foreign travelers.
“The demand slowdown has put pressure on occupancy and average room rate across major cities,” the report said, limiting hotels’ ability to pass along rising costs due to inflation.
India currently has around 100,000 hotel rooms in what is called the “organized” sector (which excludes myriad smaller and often cheaper properties), as well as an additional 85,000 to 90,000 rooms being built. Weak demand has led many hotel companies to delay new projects and even shelve 40% to 50% of new-hotel construction proposals due to the slumping business, rising financing costs and increase in construction costs, Chandan Sharma and Salil Garg, analysts at Indian Ratings, said in the report.
via Weak Economy Means There’s More Room at India’s Hotels – India Real Time – WSJ.
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