Take a look at what's going to happen in this industry in the next five years: The Hyatt group is opening seven hotels in the next four years. Mumbai is going to have two Hyatts in the next couple of years and Le Meridien and another Leela have just opened in Mumbai. Moreover, with the government looking at privatising the Centaurs (two in Mumbai), the competition will intensify. In Delhi, the Grand Hyatt has just opened as has Hotel Nikko. The ITC Marriot Towers is slated to open soon. A hotel project has been announced in corporate haven Gurgaon by the Oberoi group and other hoteliers are actively looking at properties there.

"The new supply of luxury rooms in the market will definitely affect the current players. So many hotel projects have been slated for next year and any growth in occupancy displayed by hotels is at very discounted rates," says Mr Jaidev Murti of Pannel Kerr and Forster (PKF) Consultants, who conducted an extensive survey on the hotel industry recently.

The survey shows an overall drop in occupancy and yield for hotels in the metros, expect in Bangalore, which has shown a 14.5 per cent increase in occupancy. Delhi too has shown a 1.3 per cent growth in occupancy, according to the PKF survey. "The average occupancy in the city, year-to-date, is 65 per cent, calculated after averaging the room occupancies of all luxury hotels in the city. The addition of more rooms in Delhi has led to a marginal lowering of the average occupancy rate as compared with last year," says Ms Harinder Singh, executive assistant manager (marketing), Hyatt Regency, Delhi.

But occupancy levels in the current high season seems to be choc-a-bloc. Industry sources show an occupancy rate of 73 per cent for October 2000, and an occupancy of 83 per cent last Wednesday night. Analysing the market, Maurya Sheraton's spokesperson, Ms Prathima Vasan, says the upper end of the market has grown by 15 per cent approximately, while the lower end has grown by 18-20 per cent. She feels there is a lot of buoyancy in the market and it is expected to grow.

Delhi's Le Meridien shows a year-to-date increase of 20 per cent in room occupancy and a 18 per cent jump over last year during this year's off-season, too. Hyatt Regency Delhi also has a current occupancy of 70-100 per cent, averaging 90 per cent during this high season.

Bangalore shows greater signs of buoyancy. The Taj Residency in the city has 10 per cent more occupancy this winter than last year, growing from 72 per cent to 82 per cent. Bangalore's Le Meridien has an occupancy high of 80 per cent this season as compared with 68 per cent last year, while the Taj West End and The Oberoi show occupancy levels of 75 per cent and 70 per cent, respectively.

All the hotels attribute the growth to one singular reason: the growing reputation of Bangalore as India's answer to Silicon Valley. More than 60 per cent of all the guests in the hotels here belong to the IT sector.

There is no getting away from the fact that the main reason for the higher occupancy levels in hotels, despite the gloom being predicted by industry soothsayers, has been the IT boom. It has had an energising effect on the hotel industry. With so many IT geeks, venture capitalists and dotcom owners hitting Indian shores to bodyshop or set up shop here, the hotels are raking in the bucks. "The growth has more to do with the corporate sector, particularly the IT sector, than with leisure," says Ms Meena Bhatia, resident manager and director of marketing at Delhi's Le Meridien. She feels that the market situation is good because of a number of focussed trade shows this year, which have raised hotel occupancy levels.

But the survey man, Mr Murti of PKF, differs in his analysis, and upsets all the figures presented by the hotels. "There may be general gains in occupancies because of the high levels of discounts at which rooms are being let out," he says. Many hotels give away rooms at discounted rates, some even as low as 40 per cent of their rack rates. Airline crews, because of the frequency of their visits, get the heftiest discounts. "Hotel rooms are perishable commodities. An unoccupied room is a loss and hotels feel that whatever is earned on a room is better than keeping it empty," Mr Murti says.

A point that can be proved by the growing popularity of reverse auctions of travel sites on the Net. Ms Sanchita Tyagi, spokesperson for RazorFinish.com, a reverse auction site for hotel rooms, says many of the net surfers using their sites have got rooms with hefty discounts in India. "We permit users to quote rates as low as 70 per cent of the rack rates," she says. And going by the growing number of hotels that have signed up with RazorFinish.com-300 hotel members in 14 cities in the past four months-discounting seems to be the order of the day.

"This discounting is the primary reason for the drop in yields that is being shown by our survey," Mr Murti says. The PKF survey shows a drop in yield during 2000 of 7.5 per cent in Chennai, 11.65 per cent in Delhi, and 9.4 per cent in Mumbai. The overall drop in yield from 1998 to 2000 for Delhi has been placed at 29.16 per cent, and for Mumbai at 13.50 per cent.

The number of tourists coming into India has declined since 1995 and this has made a difference to the hotels. On the other hand, corporate visitors have increased in number this year, following the high profile visits of US President Clinton, Japanese President Mori and Microsoft man Bill Gates.

"Occupancy rates are traditionally higher from September onwards and this year has seen higher occupancy levels due to the visits of these heads of state as large delegations accompany them. In fact, the consequential results of such high profile visits can be felt for an entire year afterwards with trade delegations and others visiting Delhi," says Ms Singh of Hyatt Regency, Delhi.

This summer, which is usually the low season for occupancy, the rates were 9.5 per cent more than last year during the same period, and by the same argument, the winter is seeing a resurgence of visitors, she says. "For November, we are expecting to do well as the Hyatt will be hosting the World Chess Championships for almost the entire month," she adds.

"The boom year was 1995 when revenue yield was at its peak. Now revenue yield is definitely decreasing. It will hit a trough and then begin to peak again, but when this will happen, I cannot say," says Mr Murti. 1995 was a landmark year for the hotel industry, which peaked to an all-time high because of the huge number of tourist and business visitors. It was during this year that several hotel projects were cleared all over India, and these are fructifying now.

"It may seem that there is an oversupply now because of three hotels opening up in Delhi in quick succession, but there is a demand for such rooms," says Ruchita Sharma, corporate communications manager of Grand Hyatt in Delhi. "A lot of money has been sunk into these projects, anticipating a growth in the business in India and consequent demand for luxury hotel rooms from corporate travellers," she says. But corporate travellers are getting smart too. They are learning how to wheedle discounts out of hotels. Mumbai and Delhi have some of the highest average room rates (ARR) in the world. The ARR for luxury rooms in Mumbai, which were priced at Rs 7,196 in 1998 have now dropped to Rs 6,289, a net drop of 12.60 per cent, shows the PKF survey. In Delhi, ARRs have dropped from Rs 6,631 to Rs 5239, a net drop of 21 per cent.

Some corporates are now moving away from hotels to house their travelling executives and are going for cheaper options like service apartments and guest houses. "One example of this is the consultancy firm, McKinsey. They have a large number of executives travelling from Delhi to Mumbai and now have two guest houses in Mumbai for their use, thereby cutting down on hotel costs," says Mr Murti. "The market is going to determine the rates. Hotels will be cutting their legs off if they offer any more discounts."

This surely is the adjustment period after the boom. There may not be another 1995 for the hotel industry, but who knows, the IT industry may just play godfather to the hotel industry and make it boom.

With inputs from Preeti Mishra, Bangalore