FHRAI Hotel Survey: The Industry’s Barometer

The Federation of Hotel & Restaurant Associations of India commissioned an annual Indian hotel industry survey, which brings together the industry’s key statistics for the year 2000-2001. Conducted by HVS International, the recently released Indian Hotel Industry Survey 2000-2001 covers data from over 1,103 member hotels covering 59,330 rooms across 19 cities in India. According to B K Gupta, president, FHRAI, the survey covered a vast area including facilities, manpower and operational performances integrating all aspects of the hospitality industry.

The survey indicates an upswing in occupancy levels in the year 2000-2001. Having decreased consecutively for the last three years, the all India average occupancy per hotel increased by four percentage points to 55.6 per cent in this year. All India average room rates on the other hand, decreased slightly by 3.6 per cent from Rs 2,123 last year to Rs 2,046 in 2000-01. Compared to the 16 per cent decline in average rates the year before, hotels in 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 per cent of the respondents - had a lower occupancy level (48.4 per cent) and a higher average room rate (Rs 3,459) as compared to independent hotels, which had a higher occupancy (57.5 per cent) with a lower average rate (Rs 1,308). This is partly because all chain-affiliated hotels are in the higher star category having 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 and related expenses as a percentage of total revenue was 18.2 per cent as compared to 32.5 per cent for full service hotels and 24.3 per cent for limited service hotels in the United States. Heritage hotels had the highest payroll expense at 22.7 per cent of total revenue. Energy costs in India for hotels remain very high at nearly 12 per cent 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 per cent as compared to 28 per cent the previous year.

Chennai was the market occupancy leader with an occupancy level of 75.1 per cent. Most southern cities like Bangalore (72.1 per cent), Hyderabad (71.4 per cent) and Kochi (68.2 per cent) 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, indicated that although international tourist arrivals had declined only by about six per cent post September 11th, the decrease experienced by hotels was much higher, reflecting an equally large drop in domestic travel.

Business seem to be picking up now, and is expected to get back on track in time for the season. 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.

Highlights of the report

In this report, hotels have been categorised based on star rating and size (number of rooms), in addition to providing an all-India synopsis. This year we have also presented data on chain affiliated and independent hotel properties. Aggregated information on hotels in 19 major cities in India. Given below, are a few highlights and operational characteristics of the survey results for the All India 2000-2001 survey.

• Rooms revenue, generally considered to be the most important source of a hotel’s overall profitability, represented 56.4 per cent (an increase from 55.9 per cent of last year) of total revenue across all hotels. In the case of five-star deluxe, five-star, and four-star hotels, rooms revenue represented 59.1 per cent, 58.3 per cent and 54.44 per cent of total revenue, respectively
• The domestic traveller continues to be of importance across all hotels in India accounting for 74.6 per cent of all guests. Domestic business travellers represented the

largest percentage of hotel guests at 39.5 per cent. As expected foreign guests prefer the luxury and heritage hotels. Foreign leisure travellers and tour groups comprised 28.6 per cent and 32.3 per cent of the heritage market respectively. Foreign business travellers comprised 20.6 per cent of the five-star deluxe market. Approximately 44.1 per cent of all guests made repeat visits to their hotel during 2000-2001

• Of the foreign (non-Indian) guests, the UK provided the largest demand, at 15 per cent, followed by USA, at 14.9 per cent, and Germany at 9.1 per cent
• The months of November and December were the busiest in 2000-2001 with highest average occupancies of 63.5 per cent and 63.9 per cent respectively. June through September was the slowest with July (49.8 per cent) and September (51 per cent) recording the lowest occupancies
• Wednesday through Friday was the busiest part of the week with occupancies peaking at 59.7 per cent on Thursday. Sunday was the slowest at 49.1 per cent
• Direct inquiry (56.3 per cent) continues to be the major source of advance reservations at Indian hotels followed by travel agents and tour operators at (19.4 per cent)
• Visa (37 per cent) was the most widely used credit card by guests followed by Mastercard (35.4 per cent). American Express also has the highest commission rate
• While print advertising continues to be the most popular marketing medium used by hotels (91.4 per cent) across India, we notice that 94.3 per cent and 86.8 per cent of five-star deluxe and five-star hotels respectively, also use their hotel websites as effective marketing media. This could be linked to the fact that hotels in the five-star deluxe and five-star categories also have the highest level of technology as seen in the following table:

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Draw In Synergy With The Industry

academicians should join hands and engage in brainstorming. The following would definitely contribute:

1. Industrial training must be made more meaningful at grass-root level.

2. Professionals should seek solutions to their problems from the institutes.

3. Mutual lending of resources between the industry and colleges must happen on an ongoing basis.

4. Evaluation in the institute should be done on an ongoing basis, rather than yearly or in semesters with inputs from the industry.

5. Projects should be made compulsory for all years - with a more practical oriented approach.

6. Syllabi should be reviewed and changed each year in keeping with the revolutionary changes occurring in the hospitality scenario. This should be done with the help of industry experts.

7. Teachers should be exposed to the industry for a month, each year, as a refresher.

8. Institute alumni should be closely kept in touch with because they can prove invaluable in attaining this synergy.

The Bhagvad Gita enunciates ‘Krishnorjuna’ which is Lord Krishna + Arjun. Lord Krishna symbolises ‘strategic thought leader’ or teacher. Arjun represents core competence’, a focused warrior, and one who has even conquered sleep, or the industry in other words. Until synergy is achieved between hotel management institutes and the hospitality industry the students will continue to bear the brunt. The Gita emphatically says that victory is possible only when Lord Krishna and Arjun are together. And that whenever Gita ends, war begins.