With increase in room supply, the Delhi hospitality market needs to focus on improving occupancies, while ensuring cost effectiveness of room rates By Archana Sharma
According to Max McKeown, an English writer, consultant and researcher, “Change is inevitable, progress is not,” implying even creating change doesn’t ensure progress or positive growth. And with the Indian tourism and hospitality industry undergoing various changes, the overall sentiment is positive, however, the market is observing significant effects in terms of occupancy and room rates.
According to data compiled by STR Global, hotels in the Asia Pacific region experienced negative year-on-year results in terms of three key performance metrics. It stated that the occupancy for February fell 3.6 per cent to 64.6 per cent; its average daily rate dropped 3.6 per cent to US$ 117.64; and its Revenue per Available Room (RevPar) decreased seven per cent to US$ 75.97. However, it also stated that hotels in India performed marginally well in February 2015 compared to same month previous year. Except for the Delhi market, which experienced decline in the Average Room rates (ARR), the national-wide index showed an upward growth in all the three parameters – occupancy, ADR, and RevPAR in the month of February, 2015. The occupancies in Indian hotels registered a growth of 2.5 per cent to 70.7 per cent, while ADR grew 0.1 per cent and RevPAR by 2.6 per cent.
Initiatives for progress
According to the HVS report on the Indian hotel industry 2013-14, the overall weighted occupancy across categories (58.9 per cent) increased by 1.9 per cent over 2012-13, however, the ARR dropped by 4.3 per cent over the previous year resulting in a decline in RevPAR by 2.5 per cent in the same period. The report talked about the business climate in the country being poised for improvement riding on the back of political and economic stability that is visible after the assumption of new government at the centre.
Highlighting the importance of the various measures taken by the new government, Louis Sailer, general manager, The Leela Palace, New Delhi, stated, “With the government announcing the e-visa to 150 countries and flexing up visa-on-arrival for 43 countries, the leisure and business travellers influx into the country is expected to see an overall growth and the hospitality sector is bound to be a natural benefactor.” He believes that the occupancy percentage growth for the hotels in the Delhi market in 2014-15 has remained static as compared to 2013-14. “Our overall occupancy has grown by two per cent and despite witnessing a marginal decline in the ARR city-wide, we have managed nearly the same ARR and also recorded a favourable increase in RevPar as compared to the previous financial year,” he said. “The inclusion of tourism in the Five Ts during last year’s budget has made the industry expectant as it eagerly awaits to see the future of tourism and hospitality in India grow manifold. The government has shown some intention in the past one year to develop the industry by recognising its role as a key player in driving socio-economic progress through creation of jobs by introduction of various skill development programmes, enterprise, infrastructure development and foreign exchange earnings,” said Sudha Chandra, general manager, The Ashok.
Perkin Rocha, associate general manager, Lemon Tree Premier, Delhi Airport, is positive about the hospitality sector performance in 2015 with new projects both via FDI and with a stable government in place for the next five years. “The average occupancy rates for the Delhi-NCR region was 57.7 per cent, however our ARR is Rs 3,500 with an occupancy of 85 per cent and RevPar of Rs 2, 700. Even though most of us will depend on how we position ourselves as a brand, but till now all the operating hotels have performed well with the average occupancy of 85-89 per cent,” he stated.
Believing that the future of the hospitality sector for 2015 will be better than last year due to the initiatives by the government, Vijay Wanchoom, senior executive vice president and general manager, the Imperial New Delhi, stated, “The occupancy rates for Delhi-NCR has been around 59 per cent and The Imperial observed an average occupancy of 67 per cent with an ARR of Rs 14,000 and RevPar of Rs 9400. The Delhi market will also observe new hotels coming up, mainly in the three-four-star category.”
According to Taljinder Singh, general manager, Taj Palace Hotel, the Delhi economy has suffered in the first quarter, but it is expected to show improvement only in the third quarter. “The third and fourth quarter of 2014 have been better in comparison to the previous years but on an average, the year has been the same as 2013-14, however, going forward, one can see an upturn in the trend. The efforts by the government in terms of attracting investment are paying off and as a hotelier, the market as well as the sentiment is very buoyant, leading to more traffic in the Indian market,” he added.
Highlighting the various aspects of the Delhi hospitality market, Rohit Bajpai, general manager, Radisson Blu Hotel, New Delhi Dwarka, feels that the Delhi market is doing reasonably well in comparison to other markets of the country. “With Delhi being a mix market for corporate, MICE and leisure and also being a major wedding hub, the market is looking up and improving,” he stated. Talking about the increase in room inventory, Bajpai feels that the ADR will affect only limited properties. “The Delhi NCR market is huge and therefore the business areas are divided and have large differences ensuring that something happening at one part of Delhi NCR might not necessarily affect the hotels in the rest of the region,” he stated. He also feels that with hotels sub-defining their markets, where some hotels only thrive on F&B or weddings, or the hotels near convention centres thriving on MICE, the Delhi hospitality segment will fare better than Bengaluru, Chennai or Mumbai.
Countering competition and challenges
With the increasing supply and room inventory, the competition for occupancy, ARR and RevPar management will have to be well thought while planning ahead and making the brand strategies. Talking about the Aerocity hotels, Sailer stated, “There is still time when Aerocity will become a formidable competition to hotels in Delhi-NCR and specifically in the ultra luxury segment, we do not see any products that can compare with the Leela Palace.” However, looking at enhancing their business by over 45 per cent in the second year of operations, Antony Page, general manager, JW Marriott Hotel New Delhi Aerocity, believes that the property has already seen remarkable occupancy and will soon be able to place themselves amongst the top five or six luxury branded hotels in Delhi.
Holding a different perspective, Bajpai feels that with Radisson Blu, Dwarka the main challenge would be maintaining their current position. “With Aerocity coming up, there is an increase in stiff competition, but since we have already been there as a market leader for that part of the town, we are looking at different ways to retain our position.” Adding to this, Wanchoom sees Aerocity to be crucial for hotels in the next two or three years, as there is supply of rooms but not high demand. This makes hotels dependant on MICE business, crew and weddings only.
Also highlighting on the increased competition, shifting economics, and unique demands from shifting demographics, Aseem Kapoor, general manager, Hyatt Regency, New Delhi, feels that the company will be focusing on innovative strategies for online visibility, content engagement, conversion and the user experience. “As customer awareness continues to grow through online, mobile, and social media, focus in terms of marketing and operations will be on providing an increasingly sophisticated and personalised guest experience, enabling and aligning employees, technology, and operational processes to make guest interactions simple and convenient for specific preferences.”
Potential and new segments
With the dynamic nature of the tourism and hospitality industry, it becomes imperative for various hotel brands to keep coming up with new ideas and strategies to increase their market share. Elaborating on the same, Bajpai feels, “At Radisson Blu, we are looking at newer markets which were never tapped as a lot of our business comes from Rohtak and Jhajjar, the new and upcoming destinations just like Gurgaon which was about 15 years ago. The key is to find and develop newer markets and being at the top of the game for those markets to be able to churn out better business.” They also get major business from factories and plants set up in those areas and from North Delhi for weddings.
Highlighting the importance of the MICE segment for JW Marriott, Page stated, “MICE is making up for an enormous amount of our rooms and creating a revenue stream. Therefore we are looking at targeting the same by holding more international and pan India conventions and conferences in the hotel.” However, he also feels that leisure guests will keep increasing as the property is also used as a drop off point by international leisure travellers opting for the Golden Triangle, finishing with Delhi again before going to the next destination. Adding to the same, Kapoor feels that MICE, wedding and banqueting segments could generate more revenues.
The location of the property also plays a key role in establishing the major segments that a property can cater to. Highlighting the same, Wanchoom says that the Imperial holds a unique position in the city due to its location and historical background and therefore the increasing competition has not affected the business. “Going forward we will still continue our marketing efforts in the leisure segment in our key markets of USA, UK, Australia and Germany along with focusing on new ones like South America, Scandinavia. The highest potential is at the moment in MICE business for both international and domestic clients, followed by leisure and we have seen some growth due to the focus by the government for this sector,” he added.
F&B – Growth drivers
With the increasing disposable incomes and better purchasing power, the F&B segment is also playing a major role in generating revenues for the hospitality sector. “The F&B segment is booming and even though it is still at a nascent market for us, with our seven outlets offering various cuisines at Radisson Blu, people are gradually visiting the property for various dine-in options,” Bajpai added. Adding to the same, Singh feels that for hotels with F&B outlets, the key is to keep prices reasonable and to keep on providing cutting edge and innovative product.
Talking about innovative food and beverage concept to being the key, Kapoor feels, that going forward the focus of Hyatt Regency Delhi will be on the food and beverage segment as they strive to bring in more energetic and innovative concepts in the form of our upcoming product addition– The Mansion’s Living Room.” Adding to the same, Wanchoom feels that their F&B outlets contribute to about 45 per cent stake in the annual hotel budget.
Talking about their strategies to drive the F&B segment further, Rocha stated that the last year’s figures were quite encouraging in the segment and therefore we are looking to start specific memberships focusing largely on dining options and conversion of non residential guest as a repeat guest.