A Lot Of Empty Rooms

Another reason why hotel majors are reporting flat results for last year is the steady rupee, that came in the way of better realisation of forex earnings.

With 90 per cent of its income generated through the business clients the Taj Group's Indian Hotels has reported a dip in the occupancy rates from 71 per cent to 64 per cent. Volume growth has been limited to just 12 per cent for the year ended March 97. The Oberoi group's East India Hotels (EIH), too, achieved similar growth in turnover. At 11.3 per cent, last year's volume growth is a pale shadow of the 44.5 per cent growth in 1995-96.

 

The only player to defy this depressing trend has been the Asian Hotels, owners of the Hyatt Regency chain, which achieved a growth rate of 23.2 per cent.

It to has reported a small dip in occupancy rates, but still its occupancy rate stood at an impressive 81 per cent. One reason for that possibly could be its room rates which are comparatively lower. With the volume growth not keeping pace with the expenditure, Indian Hotel's operating profit margin came down from 44 per cent to 41.2 per cent. A substantial hike in depreciation (33.4 per cent), and interest (10.5 per cent) restricted its net profit growth to just 4.48 per cent.

On the other hand, EIH achieved a net profit growth of 14.9 per cent, overcoming the dip in OPM from 43.8 per cent to 41.3 per cent. This was achieved through better control over its debt - with interest coverage at an healthy 13.5 times, and trimming down the tax liability substantially by 33.5 per cent. Despite the equity bloating from Rs 33.80 crore to Rs 52.39 crore, it sustained the earnings per share.

Asian Hotels once again stood apart with improvement in OPM from 51.3 per cent to 58.4 per cent. It carried forward its volume growth into the bottomline, which grew by a staggering 56.6 per cent. Better profitability is mainly due to hike in tariff rates by 58 per cent from October 96. Despite the hike, it still maintains a tariff advantage. More importantly, the company has benefited from the drastic reduction in the interest outflow - that was just one-twelfth of the figure in the previous year.