Indian Hotel Industry on a Party Spree

The Indian hotel industry is increasingly becoming more attractive for investors the world over. This is mainly because of the fact that in most of the major cities a huge demand-supply gap continued, which has resulted in an excellent growth in occupancies and Average Room Revenues.

With 4.4 m visitors arriving in the country for the year 2006, all the hotel chains have witnessed robust growth. As India emerges as one of the world’s fastest growing tourism markets, the party of the hotel industry will continue in the coming years too.

EIH Ltd, ITC Hotels, Hotel LEELAVENTURE, IND Hotels, ORIENTAL Hotels and TAJ GVK Hotels are some top scrips in the sector. ITC Hotels is not listed separately and is part of the ITC scrip.

To assess the performance of players in this sector, the following are the key performance indicators:Occupancy rates, Average Room Rent (ARR), RevPAR (revenue per available room, Operating margins

EIH is a member of the Oberoi Group that runs and manages luxury hotels in India and abroad. It operates under ‘The Oberoi’ and ‘Trident‘ brands. EIH has presence in key gateway cities like Mumbai, Delhi, Chennai and Bangalore where occupancy rates and ARR’s continue to remain robust. While the company's topline registered a growth of 19.6% YoY, net profits rose by 168% YoY (if one excludes the extraordinary income received in 3QFY06).

Indian Hotels (IHCL), the owners of the Taj chain of hotels, is India's largest hotel chain with an estimated room inventory share of 25% in top seven cities in the luxury segment (room inventory share is the share of Indian Hotels of the total rooms available). On a consolidated basis, including properties under the management control, the total inventory in FY06 stood at a little over 9,256 rooms.

Like its peers, ITC too benefited from the strong tourist inflow into the country during 2006. This division recorded a growth of 29% YoY for the quarter backed by 37% YoY growth in its RevPAR (revenue per available room).

Asian Hotels, the owners of the Hyatt Regency chain of hotels has also posted a rise in operating profits

Today, India is one of the most exciting emerging markets in the world. According to recent estimates of the WTTC, Indian tourism demand will grow at 8.8% (CAGR) over the next ten years (from 2005-15), which would place India as the second most rapidly growing tourism market in the world.

The tourist arrival will touch new heights fuelled by the low cost airlines, growing infrastructure thrust by the government and India’s emergence as an outsourcing hub.

Based on the forecasted growth in demand it is expected that another 100,000 to 125,000 rooms will be needed in the next five years, to be able to meet the demand. Till then, the party for the hotel majors will continue.