2000-2001 INDIAN INDUSTRY SURVEY REPORT 2000-2001 REPORT

The Indian office of HVS International, a global hospitality consulting and hotel appraisal firm, has recently published the 2000/01 FHRAI Hotel Industry Survey - an analysis of the hotel industry in India. Commissioned by the Federation of Hotels & Restaurants Association of India the annual Indian Hotel Industry Survey, which brings together the industry's key statistics for the year is, possibly, the most authoritative source of data on the industry in the country. The recently released Indian Hotel Industry Survey 2000-2001,sponsored by CNN covers data from over 1,103 member hotels covering 59,330 rooms across 19 cities in India.

The survey indicates an upswing in occupancy levels in the year 2000-01. Having decreased consecutively for the last three years, the all India average occupancy per hotel increased by four percentage points to 55.6% this year. All India average room rates on the other hand, decreased slightly by 3.6% from Rs 2,123 last year to Rs 2,046 in 2000-01. Compared to the 16% decline in average rates the year before, hotels this year were able to generate higher occupancy levels without steep discounts on room rates.

According to HVS International, chain affiliated hotels (branded), which constituted 12% of the respondents had a lower occupancy level (48.4%) and a higher average room rate (Rs 3,459) as compared to independent hotels, which had a higher occupancy (57.5%) with a lower average rate (Rs 1,308). This is partly because all chain-affiliated hotels are in the higher star category with higher rack rates."

For the first time, trends in payroll and related expenses were analysed and reflected in the report. The all India average for Payroll & Related Expenses as a percentage of total revenue was 18.2% as compared to 32.5% for full service hotels and 24.3% for limited service hotels in the United States. Heritage hotels had the highest payroll expense at 22.7% of total revenue. Energy costs in India for hotels remain very high at nearly 12% of total revenue. Navjit Ahluwalia, Senior Associate, HVS International indicates that despite decreasing yields and increasing operating costs, the all India average net income as a percentage of total revenue decreased only marginally, standing at 27.2% as compared to 28% the previous year.

Chennai was the market occupancy leader with an occupancy level of 75.1%. Most southern cities like Bangalore (72.1%), Hyderabad (71.4%) and Cochin (68.2%) also achieved high occupancies. In terms of room rates, New Delhi, similar to last year, maintained its position at the top with an average room rate (ARR) of Rs 3,911. Mumbai was the second highest at Rs 3,591.

Compiled before the attacks on the World Trade Centre in New York on 11th September, the report does not incorporate the impact of the event on the hotel industry. Manav Thadani, Managing Director, HVS International, the world's leading hospitality consulting firm, responsible for the survey, indicated, however, that although international tourist arrivals had declined only by about 6% post September 11th, the decrease experienced by hotels was much higher, reflecting an equally large drop in domestic travel. Business appears to be picking up now, and is expected to get back on track in time for peak season - from October onwards in India. On another front, the ITDC disinvestments are expected to temporarily decrease hotel supply in New Delhi in the near future, which is likely to have a positive impact on the city's occupancy levels.

For more information on the current state of India's hospitality industry, click here (click here) to view the report.

Written by: Manav Thadani and Navjit Ahluwalia

Manav Thadani joined HVS International's New York office as a consultant and valuation analyst in September of 1995. Prior to joining HVS, he gained six years of operational experience in various hotels in New York City while completing his undergraduate and graduate education at New York University. In early 1997, he transferred to the HVS London office; from there, he planned the opening of HVS International's first Asian representative office in India. He was appointed Associate Director (India) in mid-1997, and the office in New Delhi was established in September of 1997. In 2000, he was promoted to Managing Director of the HVS International New Delhi office.

Navjit Ahluwalia has 13 years of experience in the hospitality industry. Formerly, Navjit served as Food and Beverage Manager for the Windsor Manor Sheraton and Towers hotel in Bangalore and the Hilton in New Delhi. Prior to joining Hilton, Navjit worked with the Oberoi Group for eight years in different management positions. In India, the HVS team has worked on projects ranging from market and feasibility studies; valuation of hotels; residual land values; management contract values; management contract negotiations; development strategies for new brands; impact analysis; research reports; and investment services. HVS assignments in the Indian subcontinent have covered 21 cities. Our clients in India include Indian Hotels, EIH Ltd., ITC Hotels, Hotel Leela Venture Limited, Forte Plc, Six Continents Hotels, Mandarin Oriental, Carlson Hospitality, Hyatt International, Hilton International, Choice International, and UP Hotels, among others.

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