Newstrack

Nationwide rack rates poised for 20 per cent September hike

Preeti Kannan - Chennai

Buoyed by consistently high occupancies nationwide (Hyderabad clocking the highest occupancy of 85 per cent, Pune 84 per cent) and nationwide ARRs breaching Rs 6556 in 2005-06, hotels pan-India, are poised for an increase in rack rates by 20 per cent, September onwards. This is a significant increase over the standard of 8 to 10 per cent usually expected this time of the year. Even Credit Rating Information Services of India Limited (CRISIL) Research estimates that the ARR is expected to move up by 20 per cent in the premium segment hotels in the four metros and Bangalore, Hyderabad, Pune, Ahmedabad, Jaipur, Goa, Agra and the state of Kerala.

The overall ARR in these 12 cities is about Rs 6,556 this year, compared to last year's Rs 5, 000 - a 30 per cent increase. Speaking to EH, research analyst Binaifer Jehani, CRISIL Research, said, "We estimate an upward trend in ARRs in these cities. Even the overall occupancy is expected to move to 76 per cent from 74 per cent last year."

Pune will see its ARR increase by about 30 per cent as the inventory available in the city is as low as about 500 and Hyderabad will witness a 30 per cent increase next year. While Delhi is not expected to receive adequate supply for the next five years, ARRs will start falling in cities like Bangalore, Chennai, Pune and Hyderabad in the financial year of 2007 - 2008, as many projects are expected to be completed by then. Even leisure destinations like Goa and Jaipur will face an acute shortage of rooms for the next five years, barring the state of Kerala.

GRT Hotels and Resorts' CEO T Natarajan says that hotels in four star categories, including his, will look at upping their rack rates by 10 and 15 per cent, compared to the seven per cent increase last year. Vikram Cotah, GM, Radisson GRT Hotel, points out that even the Company Volume Guaranteed Rates (CVGR) given to corporate clients will be revised from September 1. These increased rates are attributed to the spiralling casts of raw material, labour and overheads, not to mention the high levels of attrition in the industry. The positive side is that the hospitality industry will see investments up to the tune of Rs 90 billion from both Indian and foreign players for the next five years in the premium segment, observes CRISIL Research.