A recent survey revealed that the hotel industry has been hit by declining occupancy rates.
Occupancy rates, which had touched over 90 per cent in the early nineties following a surge in business travellers from overseas, have fallen by nearly 10 per cent in the metros during 1997-98.
For instance, average occupancy rates in Mumbai fell to 63.5 per cent in 1997-98 from 67 per cent the previous year. In Calcutta, occupancy rates came down to nearly 50 per cent from more than 65 per cent during the same period. Both political instability and economic slowdown have contributed to the drop in occupancy levels.
The recession in the hotel industry was reflected in the performance of the EIH Ltd in 1997-98.
The company registered a near 2 per cent decline in hospitality sales in 1997-98 compared to 11 per cent increase the previous year.
While operating profit decreased by over 8 per, profit before tax declined nearly 14 cent over the previous fiscal. The sharp rise in depreciation (up 30 per cent) and a near 13 per cent increase in interest charges appeared to be responsible for the decline.
Further, these increases in interest and depreciation also affected the company's net profit. Despite a near 39 per cent decline in tax burden, its net profit recorded a drop of nearly 11 per cent.
EIH (formerly East India Hotels Ltd) of the Oberoi group is a Calcutta-based leading Indian hotel chain with more than 30 hotels worldwide. EIH's chain of luxury hotels includes properties in Indonesia, Saudi Arabia, Egypt, Sri Lanka, Mauritius, Australia and 16 in India.
The beginning of the last fiscal saw the commissioning of the company's hotels, The Cecil in Simla, The Oberoi Lombok in Indonesia, Rajvilas in Jaipur and The Trident also in Jaipur.
In the current year, the company has major plans to commission Trident hotels in Udaipur and Cochin and also The Oberoi in Chennai.
New Trident hotels are also being planned for Chennai, Coimbatore, Pune and Delhi during the next two to three years, whilst new Oberoi hotels will open at Agra, Udaipur, Mysore and Jaisalmer.
EIH is on an aggressive drive to increase its hotel rooms throughout the country inspite of recent fall in occupancy rate, as the industry is upbeat about its long-term prospects. It is estimated that by 2000, the country will need 1,25,000 hotel rooms as against the currently existing 63,115 hotel rooms. The shortage is acute in the three-star category by over 25,000 rooms. In the five-star category, the estimated shortage is over 22,000 rooms.
EIH Ltd was incorporated in 1949 and promoted by M S Oberoi and Oberoi Hotels (India) Pvt Ltd.
Besides owning 13 hotels in India, EIH also manages three hotels on contract basis, the Trident Chennai, Novotel Agra and Krishna Oberoi, Hyderabad. Targeted at the business traveller, 75% of its revenues accrue out of 912 rooms located in New Delhi and Mumbai. Business travellers constitute 85 % of its guests. Occupancy rate of rooms is around 65 %, with its Mumbai property accounting for highest average room rate (ARR).
The company has recently decided to invest Rs. 1150 crore over the next four years in adding leisure destination properties and budget hotels to its portfolio.
EIH Ltd. plans to contribute Rs 500 crore as equity investment in different projects being promoted by the group. For the company, this will mean an outgo of at least 60 per cent of its net cash accruals over the four-year period.
The investment of Rs 500 crore will be in addition to EIH's own expansion plans pegged at around Rs 350 crore.
The company is also undertaking capacity expansion at the Oberoi Bangalore and the Oberoi Grand, Calcutta, by adding a total of 75 rooms. A major facelift is also on the cards for the Oberoi Towers, Mumbai.
