With fewer rooms, Oberoi Delhi also has lower occupancy post Rs 6 bn revamp

At under 50%, the hotel's occupancy is lower than 65-70% enjoyed by most peers; even its revenue per room, at Rs 7,000, falls short; hotel has also lost patronage of lawyers to its rivals

The Capital’s iconic luxury hotel, the Oberoi, which reopened in January this year after a two-year-long renovation, has not only fewer rooms, but also fewer guests, visible in an occupancy level of sub-fifty per cent, three industry executives tracking the Delhi hotel market said. This occupancy is lower compared with 65-70 per cent enjoyed by most peers in the city.

BSE-listed EIH, which runs hotels under the Oberoi brand, has invested Rs 6 billion in a renovation exercise that started in early 2016. The refurbished hotel has larger rooms but a lower capacity of 220 rooms, compared to 283 earlier. It is learnt that the hotel has enjoyed an average room rate of Rs 14,700 in the first four months of FY19, with occupancy of approximately 48 per cent, one of the three executives said.

That translates into a Revpar or revenue per available room of just about Rs 7,000, lower than some of its peers. Revpar is the real measure of revenue and is derived by multiplying the average rate by the occupancy percentage. It is learnt that there has been some improvement in the average rate and occupancy in July, but occupancy is still low at about 51 per cent.

The hotel is critical to the company’s revenue and profits. It contributed Rs 1.87 billion, or 14 per cent of EIH’s annual revenue of Rs 13.4 billion in FY15, the last full year when the hotel was operational. EIH’s results for the April-June quarter, announced early this week, shows a profit of Rs 101.9 million, marginally lower than the profit of Rs 115 million in the corresponding quarter of last year when the Delhi hotel was closed for renovation. Revenues, however, grew about 17 per cent to Rs 3.34 billion.

The Oberoi, New Delhi reopened in January, three months ahead of schedule. A company spokesperson did not comment on the occupancy rate, but said the hotel opened with the highest average room rate (ARR) in the city and has maintained the lead throughout. “In February, the Oberoi, New Delhi achieved a Revpar 1 position in the city. The hotels ARR is considerably higher than the average of its competitive set, which consists of the Leela, Imperial and Taj. This trend has continued in the summer months,” the spokesperson said. The company said the hotel’s Revpar is 17 per cent higher than the FY16 numbers.    

EIH said increasing corporate business at hotel is the next thing on the company’s agenda. “A lot of this business comes through request for proposals (RFPs) and these inspections and acceptances will happen starting this fall.

Guest feedback on the hotel has been excellent and this too will help position us as Delhi’s leading luxury hotel. We remain optimistic on the hotels performance for FY19”, the spokesperson added.

An industry executive said that The Oberoi had a lot of C-Suite guests and most such companies decide to give a new or renovated property some time to stablise before they start booking. “Many companies who book such hotels for outstation meetings of their teams were expecting the hotel to open later than the initial target of April 2018. That business is also yet to pick up”.

A large number of corporate lawyers who visit Delhi regularly for client’s work used to stay at The Oberoi due to its proximity to the Supreme Court and the High Court. “On any working day, Oberoi used to have at least 30-40 lawyers staying at the hotel. While the hotel was shut, this business went to Taj Palace, Imperial and ITC Maurya. These lawyers have been pampered at the rival hotels and it may take a long time before they go back to Oberoi,” the executive said.