Take Chalet Hotels, for instance. The asset owner for brands such as Marriott and Renaissance has been able to exercise the pricing power because of a strong demand, said Sanjay Sethi, managing director (MD) and chief executive officer (CEO) at the firm. “This year there is less resistance by corporate houses to room rate increases because rooms are just not available on peak week days in key business cities. They would rather pay an annual negotiated rate rather than end up paying higher online rates," said Sethi. For the first time in three years, the price hike is not bothering the corporates. “Earlier, whenever we wanted to increase rates, there would be a huge resistance,” added Sethi.
Rooms aren’t available at any hotel in the key metros for most part of the week. For the first time in three years, the price hike is not bothering the corporates. “Earlier, whenever we would want to increase rates, there will be huge resistance,” Sethi added.
Dipak Haksar, CEO, ITC
Hotels & Welcomhotel, points out that considering India continues to be an integral part of the growth plans of most companies
globally, fluctuations in the performance of the economy will not necessarily have a significant impact on business travel, at least in the short-term. He, however, added the slowdown has weighed in other ways. “I am certain that there is also an increase in day return trips where people travel to a city in the morning, complete their work and fly back the same evening,” said Haksar. The first few months saw some sluggishness because of elections, but the trend has been very positive from October onwards, he added.
The strong up-cycle witnessing the hospitality sector comes amid a lack-lustre corporate performance. Net sales of sample of 2,398 companies
surveyed by CARE Ratings
were almost flat in the first half of FY20, advancing only 0.4 per cent, as against the growth of 17.3 per cent in the corresponding period a year ago. The snapshot of the same companies in the second quarter of the fiscal present a more dismal picture with net sales and net profit seeing a year on year decline of 2.7 per cent and 65 per cent, respectively.
But the performance hasn’t dissuaded companies. Ritu Mehrotra, country manager India, Sri Lanka and Maldives at Booking.com says the travel e-commerce firm has seen bookings for business hotels surge year-on-year for the last seven months. “We have seen an increase in bookings for businesses across key metros,” said Mehrotra.
Anish Khadiya, founder and Chief Business Officer of Itilite, a business travel solution platform says while companies are cautious about travel and last minute bookings, they aren’t doing away with it altogether. "The senior stakeholders of the companies are the ones who will drive the business in times of slowdown. Reducing privileges has had a boomerang effect in the past as it reduces motivation,” says Khadiya.
Room supply is expected to see a compounded annual growth rate (CAGR) of five per cent for the next five years from FY19, according to ICICI Direct Research. This would help keep occupancy levels at hotels in India healthy. The brokerage expects average occupancy levels to increase to 73 per cent by FY23. This should help companies to improve their ARR (average room rate) significantly, it said.
Vineet Verma, executive director and CEO, Brigade Hospitality which manages assets of brands including Grand Mercure, Sheraton, Holiday Inn and Four Points, agrees. “While there is an overall economic slowdown, hotels are seeing a strong uptrend since October.” Unlike last year, corporates are far more flexible with regards to price hike. Brigadier will be opening its 51-room five-star property Grand Mercure in GIFT City, Gujarat— its first outside South India, in December.
Others have seen a similar trend. Vivek Bhalla, regional vice President - South West Asia at InterContinental Hotels Group (IHG) said average daily rates (ADRs) for IHG’s luxury and upper-upscale business hotels grew by over 6.5 per cent, as compared to last year. The last quarter this year is also expected to see a growth of approximately 6-7 per cent in ADRs. “Our corporate guests are willing to pay a premium for tailor-made experiences and good service which makes their stay comfortable,” said Bhalla.
With the pace of room addition being slower than the actual demand, the up-cycle is witnessing the hospitality sector is likely to continue. In an indication of the current trend, occupancy levels across key business destinations including Mumbai, Delhi, Hyderabad, peaked the most in five years, according to ICICI Direct and Hotelivate research.