Average room rate pick-up may be slow over next 3-5 yr

Though the room supply may remain moderate over the next 3-5 years in India, the pickup in average room rates (ARR) is likely to be slow due to current low occupancies, rating agency ICRA said today.
"In spite of expected supply moderation over the next 3-5 years for India, the pickup in rates is likely to be slow in view of the current low occupancies," ICRA said in a report.
India has suffered from a large addition of over 20 per cent annually, which has negated the effect of domestic demand pick up, ICRA said.
Further, the economic scenario in the country has been weak with high inflation or interest rates and weak consumer and corporate confidence.

Overall, in view of the current economic outlook, ICRA does not anticipate any pick-up in ARRs in 2014.
However, with relatively healthy domestic demand, it expects occupancies to stabilise in second half of 2013-14, and witness marginal improvement in 2014-15.

Based on current market trends and outlook ICRA has maintained its forecast for a 0-5 per cent hike in tariff in the season, however, with discounts and freebees the ARRs might remain flat.
Overall, ICRA expects 0-2 per cent decline in revenue per Available Room (RevPARs) for 2013-14.
The flagging performance of the industry during the past five years has increased focus on ancillary streams like Food & beverage (F&B) outlets, banqueting services, spas and salons and retail outlets, it added.