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How the top hotels have fared

Last updated on: June 30, 2009 21:57 IST

The Indian hotel industry posted dull numbers during the quarter and year ended March'09. The first half of the financial year 2008-09 was affected with financial crises whereas the second half was affected due to the terrorist attack in Mumbai.

The occupancies of various places during the year has posted sharp decline. According to industry sources, the aggregate supply of cities like Delhi, Bangalore, Chennai, Hyderabad, Kolkata and Goa increased by 3 per cent to 18,447 rooms per day, but aggregate demand slid down by 12 per cent at 11,352 rooms per day.   

During the year, the occupancy rate in Delhi decreased to 62 per cent from 73 per cent in FY'08, Bangalore decreased to 59 per cent from 70 per cent, Chennai dipped to 65 per cent from 71 per cent and Hyderabad declined to 59 per cent from 69 per cent.

The average room rate during the year has declined in all metro cities expect Chennai and Kolkata. The ARR in Chennai increased to Rs 8,507 from Rs 8,229 and Kolkata rose to Rs 7,585 from Rs 7,341 in the corresponding previous year.

The ARR for the Delhi came down to 12,236 from Rs 12,572, Bangalore from 12,023 to 11,506 and Hyderabad from Rs 7,655 to Rs 6,754.   

After the terrorist attack in Mumbai on November 26, 2009, the number of foreign tourist arrivals has declined sharply. With the key initiatives taken by the ministry of tourism, the signs of revival is observed but with a slower pace.

FTA for the month of May'09 stood at 2.95 lakh (295,000) as against of 3.01 lakh (301,000) in May' 08, a decline of 2 per cent on a y-o-y basis.

Foreign exchange earrings in rupee terms has touched Rs 3,249 crore (Rs 32.49 crore) for the month of May'09, an increase of 9 per cent on a y-o-y basis. In terms of USD, the FEE was lower by 6 per cent to $669 million.

For January-May 2009, FTA at 21.27 lakh (2.13 million) was lower as compared to 23.79 lakh (2.38 million) in January-May 2008. FEE during YTD (year to date) stood at Rs 20,892 crore (Rs 208.92 billion) compared to Rs 22,416 crore (Rs 224.16 billion) in the corresponding pervious periods.

During the same period FEE in USD for FTA stood at $4,211 million as against $5,589 million.   

The aggregate total income from the operation of 40 hotel companies posted degrowth of 28 per cent to Rs 989.52 crore (Rs 9.9 billion). Operating profit margins contracted by 1380 bps to 24.6 per cent resulting operating profit to decline by 54 per cent to Rs 243.05 crore (Rs 2.43 billion). Other income went up by 97 per cent to Rs 51.27 crore (Rs 512.7 million) restricted PBIDT degrowth to 47 per cent at Rs 294.32 crore (Rs 2.94 billion).

With a hike in interest cost by 24 per cent to Rs 56.38 crore (Rs 563.8 million) and depreciation by 11 per cent to Rs 68.41 crore (Rs 684.1 million); PBT has decline by 62 per cent to Rs 169.53 crore (Rs 1.70 billion). Further, a spike in the effective tax rate by 1,110 bps to 46.6 per cent paved the bottom line to decline by 68 per cent to Rs 90.45 crore (Rs 904.5 million).

The hard time for the Indian hotel industry is expected to continue in the current financial year also. With the cut in corporate travel, both domestic and international travel could result in the above the conditions.

The industry is facing heat with a fall in the occupancies; according to industry sources, the occupancy rate has declined by more than 30 per cent in all major cities in the first two months quarter in all major cites.

To maintain occupancy, hotels were forced to reduce room rates by more than 10-15 per cent percent. The condition may improve only when the next peak season starts, ie from November'09.

Indian Hotels profits decline by 72 per cent

Indian Hotels, one of Asia's largest and finest hotel companies has posted 40 per cent fall in total income from operation to Rs 332.68 crore (Rs 3.33 billion) for the quarter ended March 2009. The fall in the topline, mainly due to the fall in the occupancy rate to 64 per cent from 82 per cent in the corresponding period, average room rent from Rs 12,660 in Q4 FY'08 to Rs 10,374 in Q4 FY'09, and revenue per available room has drastically declined to Rs 6,662 from Rs 10,430.

With the fall in topline and no change in expenditure, the operating profit margins contracted by 3520 bps to 9.3 per cent resulting operating profit to decline by 88 per cent to Rs 30.96 crore (Rs 309.6 million).

Other income also declined by 11 per cent to Rs 12.24 crore (Rs 122.4 million), interest cost increased marginally by 4 per cent to Rs 22.94 crore (Rs 229.4 million) and depreciation up by 28 per cent to Rs 28.55 crore (Rs 285.5 million); as a result, PBT before forex loss eroded and looked red at Rs 8.29 crore (Rs 82.9 million) as against a profit of Rs 217.71 crore (Rs 2.18 billion).

However, the company has claimed Rs 85.54 crore (Rs 855.4 million) for business interruption with regard to value of damage to property at the Taj Mahal Palace and Tower, Mumbai, caused by terrorists in November 2008.

Resultantly, the PBT has turned around, but still looked down by 64 per cent to Rs 76.09 crore (Rs 760.9 million). After accounting increase in effective tax rate by 1,300 bps to 49.7 per cent, Net Profit looked down by 72 per cent to Rs 38.25 crore (Rs 382.5 million).

IHCL currently holds 25 properties with inventory of 3,633 rooms. However, the Taj group holds 97 properties with inventory of 11,546 rooms as on March 31, 2009.

IHCL has added one hotel during the year and, over the group, it added seven properties with an inventory of 1,176 rooms. IHCL is planning to open three hotels in current financial year with 510 rooms.

As far as the Taj group is concerned, it expects to add 10 hotels and 1,794 rooms in FY'10.

The company agreed to acquire a controlling stake in the shares of ELEL Hotels and Investments for a value of Rs 680 crore (Rs 6.8 billion). Currently, both companies plans to demolish Sea Rock hotel, which is part of ELEL Hotels, and build an integrated hospitality development with a high end luxury hotel, convention centre, retail and commercial operations.

Kamat Hotels post profits on the back of reversal forex losses

Kamat Hotels posted 49 per cent growth in profits to Rs 7.74 crore (Rs 77.4 million) despite of 40 per cent fall in total income from operations to Rs 26.84 crore (268.4 million) for the quarter ended March 2009.

The profits are mainly due to the reversal for forex losses which incurred in the first nine months of FY'09 as forex gain of Rs 14.31 crore (Rs 143.1 million) in the current quarter as against of forex losses of Rs 0.85 crore (Rs 8.5 million).

In fact, the company has posted losses of Rs 1.41 crore (Rs 14.1 million) at the PBDT level; this is primarily due fall in total income from operations combined with crash in operating profit margins and spike in interest cost.

The operating profit margins declined by 2,300 bps to 20.7 per cent as a result operating profit decline by 71 per cent to Rs 5.57 crore (Rs 55.7 million).

Outlook

The hard time for the Indian hotel industry is expected to continue in the current financial year also. With the cut in corporate travel, both domestic and international travel could result in the above the conditions.

The industry is facing heat with a fall in the occupancy; according to industry sources, the occupancy rate has declined by more than 30 per cent in all major cities in the first two months of the quarter.

To maintain occupancies, the hotels were forced to reduce room rates by more than 10-15 per cent. The condition may improve only when the peak season starts, ie from November'09.  

table.ed {border-collapse: collapse;font-family: Arial;font-weight: normal;font-size: 12px;} table.ed td {border:solid 1px #b6b6b6;}
Hotel sector aggregates hit by low occupancy and fall in ARR
  0903(03) 0803(03) Var ( per cent)
Total income from operations 989.52 1368.61 -28
OPM ( per cent) 24.6 38.4  
OP 243.05 525.77 -54
Other income 51.27 25.99 97
PBIDT 294.32 551.76 -47
Interest 56.38 45.59 24
PBDT 237.94 506.17 -53
Depreciation 68.41 61.54 11
PBT 169.53 444.63 -62
Tax 79.08 157.96 -50
PAT 90.45 286.67 -68
Figures in Rs crore; Source: Capitaline Databases

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