Hotels lure customers with monsoon offers during slow market

Occupancy in Goa's Taj Vivanta has shot up to 85% after the discounts

It is raining discounts on hotel bookings as companies lure customers with monsoon offers. Over 20% off on reservations for July-September can be availed on destinations like Goa, Bangalore, Agra, Jaipur, and many others.  
 

Although not the peak season for travel, at least some in the hotel industry can make good of the offers at a time when the sector is struggling with subdued occupancy. 

While the story is expected to remain much the same in metro cities, destinations like Goa, Kerala have managed a good monsoon season. The occupancy level in Goa’s Vivanta by Taj has shot up to 85%. In contrast, its hotels in Delhi NCR are hovering at less than 60% occupancy.  

“In a slowdown situation, people become very cautious about the spending. People trade down on hotels to save money, so the hotels in premium, midmarket segments stand to gain. Also domestic tourism has grown and lapped up the offers and discounts,” said Veer Vijay Singh, chief operating officer, Vivanta by Taj. 

Due to poor business sentiment, companies cutting costs on travel the gateway cities including Delhi, Mumbai, Hyderabad, Chennai and Bangalore the impact on occupancy and average room rates has been more severe than the leisure destinations. 

“All markets have been impacted. But there are some which are doing moderately well like Kerala and Goa. Also the mid-market and budget hotels are the least affected because they give the customers more value for money,” said Ajay Bakaya, executive director, Sarovar Group of hotels.  

The company operates hotels like Sarovar Portico and Hometel in mid and budget category.  

According to a study by Federation of Hotels and Restaurant Association of India (FHRAI) the occupancy in Delhi has gone down by 6% on a year on year basis and the average rates are down by 11%. One can easily book a luxury hotel in August in the capital for Rs 10,000 today. This is a significant drop compared to the rates of Rs 15-17,000 last year which itself was a period of struggle for hospitality industry. 

Goa and Kerala have been clear outperformers due to healthy inflow of tourists from Russia, CIS and other Eastern European countries, on account of the political events in Egypt, the study says. The hotel occupancy in these markets has remained above the overall national average at over 75% and the rates have gone up by 11%. 

 

The biggest challenge for the hotels has been the steep and persistent drop in the revenues per available room (RevPAR). As per the FHRAI study the RevPAR dropped by 10% for the hotel sector in March 2013 over corresponding period last year. “It is a tough situation, on one hand occupancy and rates have fallen and on the other the costs have increased. Hotels have to take steps to manage their costs better,” said Patu Keswani, managing director, Lemon Tree Hotels. 

Moreover, the increase in the supply of rooms has not made things any easier. For instance, according to HVS data Pune has seen a 320% increase in room supply in the last five years with current supply over 5,600 rooms which kept the average rates under pressure. Gurgaon has seen an addition of 2,000 rooms in the last three years, but it has managed to be among the cities with highest room rates at an average of Rs 8,000.  

“There is more supply waiting to come in the market which will take time to absorb. The hotels have to be more disciplined in their pricing and not drop the fares every time they fear demand is dropping as it eats into their own viability,” a senior hospitality expert said.

He also added that the overall average room rate has gone down because most of the additional inventory has comein mid-market segment and not luxury which has brought down the industry average. The total room supply in mid-market is expected to go up by 35% by 2017. A total of 93,355 rooms have been proposed to be added to the overall room supply in the country.