Hotels add fewer rooms in big cities
India’s hotel industry is seeking to reduce the pace of addition of new rooms in bigger cities after an increase in supply put average room rates under pressure even as occupancy levels rose.
Carlson Rezidor Hotel Group, ITC Hotels and AccorHotels, among others, are tapping into growth potential in smaller cities and underserved regions such as the Northeast, executives said. The pace of addition of new hotel rooms in bigger cities such as Mumbai and Delhi has fallen to 3-5% a year from 7-8% earlier, as per industry estimates.
According to Care Ratings, the average rate of return in India’s top-11 cities fell from Rs 5,598 in FY14 to Rs 5,506 in FY15 before picking up marginally to Rs 5,514 in FY16, even as occupancy level went up from 59.1% in FY14 to 60.4% in FY15 and 63.1% in FY16.
“Despite higher demand, the growth in room rates was restricted mainly due to increasing supply of rooms in major cities. Rates in a given area tend to decline with every new opening as the new rooms are marketed at lower rates,” said Darshini Kansara, research analyst at Care Ratings.