No revival in sight for hotel sector: Ind-Ra Study

Says hotel sector is still showing a gloomy outlook with revenue growth of just 5 to 10% expected during the year 2014-15

For all the talk of economic upswing post the general elections 2014, hotel sector is still showing a gloomy outlook with revenue growth of just 5 to 10% expected during the year 2014-15.

India Ratings and Research study shows no signs of revival for the hospitality sector which has been facing the blues for the past two-three years with lower demand and increasing supply of hotel rooms.

"Companies facing highly leveraged balance sheets are cutting back on their expansion plans and selling existing assets to pare off debt. The industry is unlikely to witness fresh large-scale investor and developer interest in the near term,"the study said.

The corporate debt restructuring (CDR) cell data shows that nine hotel companies received approvals for debt restructuring in 2012-2013, amounting to an aggregate debt of Rs 4600 crore.

"The number of companies undergoing debt restructuring outside of the CDR mechanism might be even higher," the India Ratings Research study says. Amid asset sale, debt restructuring, fall in incremental borrowing by hotel companies, the sector is expected to continue its struggle in financial year 2015.

The Federation of Hotels and Restaurants Association of India is also echoing asimilar sentiment. "The average rates are low as the inventory has gone up. Business travel is getting substituted by video conferencing, Skype calls which is denting hotels. We are not expecting more than marginal growth this year though it is early to say," said S M Shervani, President, FHRAI.

However,the premium segment is likely to feel more stress than the budget hotels because of its high dependence on the business traveller. Federation of Hotel& Restaurant Associations of India's(FHRAI) survey 2012-2013 shows that business travellers comprised 58.2%of total hotel guests over 2012-2013.

Presently there are around 100,000 rooms in the organized hospitality sector and an additional 85,000-90,000 are in pipeline. "Many hotel companies are delaying new projects and even shelving proposed plans (40%-50%) due to the prevailing economic downturn and increased stress levels. 80% ofthe new projects announced (by value) have been stalled over FY12-FY14," the study says.