Hospitality consulting firm Hotelivate expects that tariffs will go up by double digits across most markets this year. "Occupancy growth has improved as demand outpaced supply in most Indian markets. The uptrend is strong at the moment and tariff hikes are natural now. We expect a double-digit improvement in tariff in 2018," said Achin Khanna, managing partner (strategic advisory) at Hotelivate.
Scrips of top listed hotel companies
have started reacting already. The share price of Indian Hotels Company, which runs hotels under the Taj brand, hit a ten-year high of Rs 152.65 at the BSE on January 18. The scrip of EIH, which runs the Oberoi chain of hotels, hit a new high of Rs 232 on January 16.
Vivek Bhalla, regional vice-president (South West Asia) at InterContinental Hotels Group (IHG), said the company expects a tariff growth this year. "The rate growth for contracted accounts will be in line with market expectations. We anticipate a stronger growth than previous years," he said. The company, which operates 30 hotels in India under brands like Intercontinental and Holiday Inn, said it saw occupancies of 80-90 per cent in Tier-I cities during 2017 showing a strong year-on-year growth.
Rising spending power coupled with the proliferation of low-cost carriers has enabled increased domestic travel. "Though a large portion of domestic demand originates from commercial activity, an increasing number of Indians are also travelling for leisure purposes giving domestic consumption a boost," added Bhalla.
Lemon Tree Hotels president Vikramjit Singh said supply has grown lower than demand in recent years. Citing the Horwath HTL report, he said that while supply grew at 8.4 per cent between FY14 and FY17, the demand has grown at 13.7 per cent. In the same period, average industry
occupancy moved up to 65 per cent from 58 per cent. "This demand-supply equation, skewed towards high demand, is expected to continue," he said.
A gradual stabilisation of new supplies led to better occupancy rates
Occupancies have expanded for four consecutive years and hit a nine-yr high of 65% in FY17
Occupancies continue to rise further in FY18
Rising spending power coupled with the proliferation of low-cost carriers has enabled increased domestic travel
Industry is said to have entered a new phase of strong uptrend that may last for a few years