Euro zone crisis casts shadow on hospitality sector in India
Posted online: May 26, 2010 at 2016 hrs
India’s hospitality sector marred by recession and the 26/11 attacks is showing signs of recovery, but all is not hunky-dory with the star category hotels of the country. First the volcanic ash and now the weakening of the Euro has impacted business coming from the largest source market for Indian tourism sector—Europe. No wonder then that occupancy and room rates don’t look as gloomy as last year, but then not as healthy as projected.
Western Europe, which includes France, Germany, Italy, Greece, UK and Ireland besides other countries, contributes more than 30% of foreign tourist arrivals into the country. The figure for total foreign tourist arrivals (FTAs) visiting India last year is pegged at 5.11 million.
The Greek tragedy has left many hotel suites bereft of it’s guests. As most hotels quote prices in rupees now, weakening of the euro makes hotel rooms expensive for those using the currency. Says president and CEO of the Claridges Hotels & Resorts, Peter Leitgeb, “Europe is our key feeder market and with Euro weakening our business is being impacted adversely. European countries are facing economic challenges, the travel sentiment is definitely not upbeat.” Adds a senior official from the ITC’s hotel division, “Our properties in metro cities have not really been hit as domestic travel and traffic from Far East is booming. But yes heritage properties for sure have seen a dip in the number of travelers from Europe”.
And it’s not just revenue from the room rates that the hoteliers are worried about. Lower purchasing power means less spending on shopping, food and beverage (F&B), spas and other sources of revenue for the hotels. “Though we have not seen an immediate impact but there is likely to be a fallout. It will impact spending on F&B and also on new bookings of the group traffic,” opines KB Kachru, EVP South Asia of Carlson Hotels. For Carlson properties in India, of the total revenue that comes from foreigners, European market contributes 30-40%.
The timing could not have been worse. Hotels were still trying to recover from the aftermath of the global recession and the 26/11 attacks which changed the fate of the hotel industry in India. “The recovery has been feeble as compared to last year and to make things worse we have lost 8% of our top-line because of volcanic ash and Euro crisis,” says Rahul Pandit, VP-operations of the Lemon Tree Hotels which operates 12 properties across the country under four and three star category. As per the tourism ministry data, FTAs during the month of April 2010 were 3.54 lakh as compared 3.48 lakh in April 2009 and 3.61 lakh in April 2008. Growth rate in FTAs during April 2010 pegged at 1.7% is much lower than 12.9% that was registered in March 2010.
In the US, which also banks on European tourists, average room rates have softened as discounts are being doled out to foreign travelers. Though occupancy levels have not been hit hard. Experts believe that’s what the fallout perhaps will be for the Indian market, too, in the long run.
According to the Crisil report of March 2010 average room rates across major cities have shown a downward trend but the revenue per available room (RevPAR) has increased marginally as compared with last year as occupancy rates have increased.