The hospitality industry has increasing concerns over the risks of terrorism, which will bear negativity against tourism across the globe, PRS Oberoi, executive chairman of EIH Ltd said after the 66th annual general meeting.
“The recent terrorist attacks in Paris, Brussels and Orlando would have a significant impact on travelers’ sentiment. The industry and the government must take significant steps to counter any slow down” Oberoi said.
PRS Oberoi said in India where EIH has its main operation and owns most of its properties, the Kashmir problem could be spanner but thanks to the international media that it has not blow up the issue to an impact- able proportion.
According to Oberoi the present scenario of the hospitality industry in India was moving towards positivity with supplies of branded rooms on growth at a CAGR of 15.5% between 2012 and 2015. Demand grew at a similar pace by 15.3% for the same period. Nationwide occupancies surpassed the 60% mark coupled by a correction in average room rates. So terrorism at this point could cost huge to the industry .
EIH has increased its consolidated room rates by Rs 450 in the first quarter this fiscal, while its has also chosen this period to make investment for renovation completely closing down its prime revenue fetching property – Oberoi, New Delhi. The hotel has been closed down from April 1 for major renovation at a cost of Rs 500 crore and the hotel will reopen from April 2018. Vikram Oberoi, managing director and CEO said Delhi Oberoi has turnover of Rs 200 crore but the impact of the closure would have to be offset by optimizing efficiencies in other luxury hotels.
Due to closure of the Oberoi, New Delhi the first quarter results of EIH Ltd have been impacted to a net loss of Rs 12.24 crore during the quarter compared to a net profit of Rs 21.15 crore during the same period last fiscal. Total revenue was Rs 278.89 crore during the first quarter FY 17 compared to Rs 308.73 crore during the same period last year. EBIDTA for the period was down to Rs 33.35 crore during the quarter from Rs 47 crore during the corresponding period last year.
Oberoi said the Delhi property was more than 50 years old and it was undergoing a complete makeover to become the best of the luxury properties in the country’s capital. This would help in optimizing EIH’s profitability.
Mukherjee added another Rs 4.5 crore would be invested in Oberoi Grand, Kolkata, for setting up a new restaurant clubbing two restaurants — La – Teras and Chowringhee Bar. The Kolkata property was more than 300 years old.
Meanwhile, the company in its balance sheet of FY 16 has made of provision of Rs 41.86 crore, the amount invested in Hyderabad Trident with which it has a management contract. The provisioning implies considering the entire investment as a loss, which can tantamount to a write off. Vikram Oberoi said the investment was made for picking up 16% stake in Trident Hyderabad, promoted by Golden Jubilee Pvt Ltd. But the promoter has failed in servicing its Rs 1000 crore debt for which the consortium of banks have declared it an NPA. EIH was trying to recover its investment in Trident Hyderabad to bring it out of provisioning, while it has no involvement in the issue with the banks, Oberoi told the share holders.