Indian Hotels Q2 net slides 4.8% to Rs 50.7cr

Tata Group owned, Indian Hotels Company (IHCL), today posted a drop of 4.84 per cent in net profit for the last quarter on account of reduction in room occupancies, a notional loss on foreign exchange and increased expenditure.

The company recorded a net profit of Rs 50.66 crore for the quarter ended September 30, 2008 as against Rs 53.24 crore recorded for the same period a year ago.

The company's expenditure including staff costs, promotional campaigns for the recently launched Gateway brand had escalated by 14 per cent during the quarter to Rs 300 crore. In addition the company reported a foreign exchange loss of Rs 9.40 crore on borrowings due to rupee fluctuations during the quarter.

Anil P Goel, executive director - finance, The Indian Hotels Company, said, "We have seen a drop of 2-3 per cent in occupancies. The recent few weeks were a matter of concern. But our operational margins have been in line with that of last year. This was due to the fact that there was an increase of 10-15 per cent in average room rates."

Even though the company felt a squeeze on its margins, it reported a growth of 8 per cent in net sales at Rs 367.82 crore as compared to Rs 340.58 crore reported in the same quarter of the earlier year.

Despite a global meltdown, the company feels that there will be no pressure on it to bring the room rates down for the season. However the management also feels that there will be a shift of preference by consumers who may now look for a budget stay rather than a luxury class.

Ajoy K Misra, senior VP (sales and marketing), IHCL, said, "We have witnessed a change in preference among consumers. People are now shifting to lower priced brands from the luxury one. The movement is felt within the Taj group."

IHCL will add almost 1,800 rooms mostly by December 2008, which will be spread across the board - from budget hotels like Ginger to it's Taj-owned luxury hotels. This fresh room inventory will be added in cities like Bangalore, Mumbai, Chennai, Varanasi, Panjim (Goa) among others. This will include greenfield as well as brownfield expansion.  

The company hiked its room rates with effect from September and does not plan to reduce it during the peak season which has already started and will extend the same rates till the end of the financial year. The company is hoping that there will be no dip in foreign tourist arrivals in India this year.

"We are going to face pressures on occupancy during the peak season. The current environment is a concern for us. We are cautiously optimistic about the business," added Goel.