News: Hotels get big PAT from shortage of rooms
(DNA 05/01/2007) Mumbai - The hotel industry has had tremendous room for growth over the last couple of years.
A study of 12-odd hotels shows that they notched up a whopping 85% increase in profit after tax (PAT) year-on-year in the first half of 2006-07, on the back of an increase in average room rates (ARRs) and occupancy rates arising out of significant demand-supply mismatch.
The hotel companies under review were Indian Hotels, East India Hotels, Asian Hotels, Hotel Leela Venture, Royal Orchid, Taj GVK, Oriental Hotels, Viceroy Hotels, Sayaji Hotels, Kamat Hotels, Jaypee Hotels and EIH Associated.
Their PAT rose to Rs 317.20 crore from Rs 171.42 crore in the first half of 2005-06, even as net revenues increased 26% to Rs 1, 805.04 crore (Rs 1,430.73 crore).
Operating profits improved by 52% on an absolute basis to Rs 669.20 crore (Rs 440.45 crore) The hotels also saw a growth of 7% y-o-y in room demand.
This, coupled with better ARRs, led to a 39% improvement in revenue per available room (RevPAR, which is an interplay of ARRs and occupancy rates. RevPAR increased from Rs 3,722 per roomday in H1FY06 to Rs 5,173 per roomday in H1FY07 as ARRs improved from Rs 5,432 per roomday to Rs 7,381 per roomday.
“The PAT rose due to higher cost efficiencies. When occupancies are higher, cost-efficiencies rise, boosting operating margins in the process,” said Pratik Dalal, a hospitality analyst with Emkayshare.
The growth was supported by a 13.8% increase foreign tourists over the same period in the first half of 2006, apart from a sizeable increase in business travel.
But, analysts forecast a 5-7% rise in ARRs for the mid-market segment in the future against an “insignificant rise in ARRs” for the premium sector.
Current five star rates are in the Rs 14,000-20,000 bracket, with hotels in Bangalore commanding the higher end of the price bracket. The mid-market rates average Rs 6,500 across the country.
“Since rates in Mumbai and Delhi did not spiral upwards as much as in Bangalore, ARRs in these two cities have 10-12% room for growth,” said a source.
A study of 12-odd hotels shows that they notched up a whopping 85% increase in profit after tax (PAT) year-on-year in the first half of 2006-07, on the back of an increase in average room rates (ARRs) and occupancy rates arising out of significant demand-supply mismatch.
The hotel companies under review were Indian Hotels, East India Hotels, Asian Hotels, Hotel Leela Venture, Royal Orchid, Taj GVK, Oriental Hotels, Viceroy Hotels, Sayaji Hotels, Kamat Hotels, Jaypee Hotels and EIH Associated.
Their PAT rose to Rs 317.20 crore from Rs 171.42 crore in the first half of 2005-06, even as net revenues increased 26% to Rs 1, 805.04 crore (Rs 1,430.73 crore).
Operating profits improved by 52% on an absolute basis to Rs 669.20 crore (Rs 440.45 crore) The hotels also saw a growth of 7% y-o-y in room demand.
This, coupled with better ARRs, led to a 39% improvement in revenue per available room (RevPAR, which is an interplay of ARRs and occupancy rates. RevPAR increased from Rs 3,722 per roomday in H1FY06 to Rs 5,173 per roomday in H1FY07 as ARRs improved from Rs 5,432 per roomday to Rs 7,381 per roomday.
“The PAT rose due to higher cost efficiencies. When occupancies are higher, cost-efficiencies rise, boosting operating margins in the process,” said Pratik Dalal, a hospitality analyst with Emkayshare.
The growth was supported by a 13.8% increase foreign tourists over the same period in the first half of 2006, apart from a sizeable increase in business travel.
But, analysts forecast a 5-7% rise in ARRs for the mid-market segment in the future against an “insignificant rise in ARRs” for the premium sector.
Current five star rates are in the Rs 14,000-20,000 bracket, with hotels in Bangalore commanding the higher end of the price bracket. The mid-market rates average Rs 6,500 across the country.
“Since rates in Mumbai and Delhi did not spiral upwards as much as in Bangalore, ARRs in these two cities have 10-12% room for growth,” said a source.
posted by InCar Group Press Room at 14:01
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