Having barely recovered from the slowdown of 2008-09, the hotel and travel industry is again bracing for a tepid peak season, precipitated by fears of a US double dip recession and European debt crisis.
At its annual general meeting recently, East India Hotels chairman PRS Oberoi said, ?There was an expectation that global economies would see a recovery in 2011. Unfortunately, this is not happening. Global economies and the economic environment is still volatile.? The sentiment is shared by other hoteliers, who agree that it won’t be easy going, predicting a 10-15% decline in projected international occupancies for the season.
?We were hoping that tourist numbers from Europe and Asia would go up this season, but with the ongoing global economic crisis, that increase won’t be substantial. The US outbound travel market was already subdued and the latest crisis will also have an impact on business travel from China, Taiwan and other south Asian countries that depend on the US economy,? says Rahul Pandit, president & COO, Lemon Tree Hotels.
The earlier slump impacted India’s travel sector, with foreign tourist arrival (FTA) numbers witnessing a 2.2% decline in 2009. In 2010, the market recovered, seeing a 8.1% increase in FTAs. Though the fall in US rating from AAA to AA+ and recession fears might not have a similar impact that the slowdown of 2009 did, but it will definitely curb growth.
?Rates may come under pressure even though volumes will continue. Also, one segment that might really get hit is the luxury leisure segment,? says Suresh Kumar, president, ITC Fortune Hotels.
Tour operators also see a weak demand from inbound travellers, owing to the negative sentiment and estimate 8-10% lower revenues than what they projected for the busy season. ?People will tighten their purse strings, especially on long-haul holidays. Many leisure travellers will hold back their travel plans,? says Dipak Deva, Kuoni Destination Management, the inbound arm of travel company Kuoni. India’s largest online travel portal MakeMy Trip CEO Deep Kalra also feels that the impact might not be drastic, but the numbers from US and European markets would definitely be lower.
Analysts also predict that the current global scenario would push the Indian tourism sector’s recovery back by a year. ?Though occupancies have been strong during the past few months, room rates still have not bounced back to the pre-slowdown levels. It’s a double whammy for the hotel sector, as at the same time the room inventory has increased. Hotels’ topline will be adversely impacted,? says PR Srinivas, India head for tourism and hospitality at Deloitte. Another analyst adds that full-blown recovery will still take a year’s time.
For the record, around 5.5 million foreign tourists visited India in 2010, with top source markets being the US and UK. France, Germany and Italy also figure in the top 15 source markets for foreign tourists in India. However, once again, it will be the domestic traveller who will bring respite to the sector. ?Domestic consumption is still strong. The common man here is not affected by the macro economic picture,? says Kumar of ITC Fortune. As per a FICCI-Yes Bank study, India?s domestic tourism weathered the global financial crisis of 2008-09, with visits by domestic travelers rising to 650 million in 2009, a growth of 15.5% over 2008, the same period when the influx of foreign tourists registered a dip of 2.2%. Kalra of MakeMy Trip says this period is also an opportunity for travel agents to look at new source markets other than the US and Europe.