The Indian economy seems to be on the mend but with the global economy still in a downturn, it’s unlikely hotels in the country are going to be full in the hurry. Occupancies at Indian Hotels of around 66 per cent in the year to March 2009 were understandably lower than they had been in the previous year, partly because of the terrorist attacks at the Taj hotel in Mumbai and also because of the weak economic environment.
The US, incidentally, is a fairly important market for Indian Hotels accounting for just under a fifth of revenues. Which is why, even though worst may be over, it could take a while before occupancies and ARRs pick up in the overseas markets.
As for the home market, foreign tourists aren’t as yet flocking to the country and neither are business people. However, it’s possible things could start looking up in second half of the year. Analysts point out that Indian Hotels is highly leveraged with an estimated debt of around Rs 4,600 crore implying a debt to equity ratio of around 1.4 times.
Also fluctuations in currency rates have affected profits and the management has said that profits for the current year are higher by about Rs 15 crore because the value of foreign exchange borrowings have been restated. Revenues for Indian Hotels are expected to rise by about 25 per cent this year over the Rs 2,712 crore posted last year while profits could come in close to Rs 300 crore. The Indian Hotels stock has outperformed the market in the last three months but analysts believe the stock could take a breather since earnings growth will be subdued in the first couple of quarters.