New Delhi: Hotel occupancy rates in India slowed down in the first half of the year due to the general election and a brutal heatwave that swept the country this summer, according to hospitality consultancy HVS Anarock.
Occupancy rates, which remained largely unchanged in May, despite a 4% rise in domestic air travel with over 13.7 million passengers, are expected to improve only after September, Jefferies India Pvt Ltd said in its report.
In May, room rates across India were around ₹6,800-7,000, slightly higher than ₹6,700-6,900 seen a year ago, while overall occupancy remained between 59% and 61%.
Hotel occupancy measures the percentage of available rooms occupied by guests over a given period, indicating how well a hotel attracts and accommodates guests.
Revenue per available room (RevPAR) for May also stayed flat at ₹4,012-4,270 compared to May 2023's ₹4,087-4,347, said the new report by HVS Anarock titled 'Hotels & Hospitality Overview'.
RevPAR measures a hotel's ability to generate revenue from its available rooms, combining occupancy and average daily rate (ADR). This helps hotels understand their financial health and make informed decisions about pricing and marketing strategies.
Among popular destinations, Kochi saw the largest year-on-year increase in occupancy rates in May 2024, with a 7-9 percentage point rise, the HVS Anarock report said. However, the average rates in Kochi dropped by 10-12 percentage points.
In Goa, occupancy rates rose by 1-3 percentage points, but average rates fell 9-11% during the same period. Hyderabad experienced the biggest contrast: while occupancy rates dropped by 3-5 percentage points, the average daily rates increased by 12-14%.
Jefferies, too, pointed to a slowdown in the first half of this year's hotel performance. In line with what it had predicted, the first quarter of FY25 was relatively soft owing to the impact of elections on occupancies.
"This summer leading up to autumn will be challenging for most hotel businesses because of this being an election year and there being no large scale international level conferences scheduled," said Rattan Keswani, a hospitality industry veteran who has worked in leadership roles at Lemon Tree Hotels and EIH's The Oberoi Group of hotels.
“Several other factors too are influencing domestic travel including increased international outbound travel to easy and no visa countries. Factors like more people taking international holidays and Indian hotel companies continuing to hold their high room rates also had an impact. The real picture will be clear following autumn. Critical travel regions like Goa, Uttarakhand and Himachal Pradesh have shown a slowing down of business,” he added.
Surprisingly, new hotel openings also slowed, with only 49 hotels opening between January and May this year compared to 58 in the same period last year, according to HVS’ data. This added about 3,200 rooms to India’s organized hotel inventory, down from over 3,800 last year.
The company said it collected this data from the top 15 hotel operators.
However, the number of hotel management contracts signed increased, with 150 new deals for over 14,000 rooms compared to last year’s 110 deals for about 9,800 rooms.
Hotel management contracts are agreements between a hotel asset owner and a management company, where the management company operates the hotel on behalf of the owner.
Keswani, however, said there were pockets where business did well, like in Bengaluru and Delhi which saw rate increases potentially due to the increased activity around the elections.
He said it will be a wait-and-watch situation for companies to understand how corporate travel will shape up and whether there will be advance bookings for autumn and winter this year. Overall, occupancies could hover between 52% and 55% across India in FY25.
"Hotels may find themselves returning to their typical normalcy in terms of pre-covid occupancy numbers, but they may not be able to hold on to their rates for very long if the downtrend continues beyond autumn," Keswani added.
Vikramjit Singh, founder of Alivaa Hotels, is more optimistic. "Despite May being an election month, occupancies have stabalised. This was a temporary blip as companies were in a wait-and-watch mode and so travel had slowed down," Singh, a former president of Lemon Tree Hotels, said.
The second quarter of this year is likely to be marginally better than the same period last year, he said. “There has been talk of continuity due to a stable government and hotel occupancies should also see an improvement owing to the pent-up demand from Q1.”
