Robust run likely for hospitality sector

Re appreciation may dent Q1 profits by 8-10 per cent.

The overall outlook for the hospitality industry in the first quarter of FY08 looks robust. Analysts say that although the average room rates (ARRs) for April-May have increased by 30 per cent this quarter compared with the year-ago period, rupee appreciation has dented profits by 8-10 per cent.

"Majority of the five-star hotels have a dual tariff system, where they charge in dollars and rupees for international and domestic clients, respectively. We believe that due to appreciation in the rupee, hotels would have suffered losses anywhere between 8 and 10 per cent," said an analyst from a domestic brokerage house. The rupee has appreciated nearly 8 per cent against the dollar since January.

Though the April-June quarter is a lean season for the industry, occupancy rate rose from 56 per cent last year to 66 per cent this year for leisure destinations such as Jaipur and Agra. In Goa, however, the occupancy level dropped nominally from 77 per cent to 75 per cent. However, due to high ARRs, occupancy levels in business destinations have dropped.

In Bangalore, the ARR has dropped to Rs 13,054 this quarter from Rs 13,185 in the first quarter of 2006. But Pune has registered an increase of Rs 8,492 in this quarter from Rs 6,852 in the first quarter of 2006.

The industry has also recorded a drop in RevPars (revenue per available room) this season compared with the corresponding period last year. "Increase in RevPars was higher in the April-May 2006 compared with April-May this year because for many destinations, the room rates had already hit the peak," said an analyst.

Although the first quarter is considered as an off-season for the hospitality industry, analysts expect the coming quarter to be bright as hotels would be approaching the peak season and will revise their tariffs which in turn would boost their revenues.