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May 04, 2018

Sector Report: Hotels

This report is available to users in India for ₹40,000 + applicable taxes

 

Table of Contents

 

  • Summary
  • Pan-India Hotels Performance
  • Profitability
  • Agra
  • Ahmedabad
  • Bengaluru
  • Chennai
  • Goa
  • Hyderabad
  • Jaipur
  • Kolkata
  • Mumbai
  • NCR
  • Pune
  • Kerala

 

Summary

 

Industry profitability improves on account of increase in occupancy rates in fiscal 2017

 

Huge supply additions and slowdown in demand have accounted for premium category hotels reeling under severe stress since fiscal 2012. After plummeting to a decade low of 59% in fiscal 2014, the industry occupancy rate (OR) increased marginally to 60% in fiscal 2015 and 62% in 2016,because of moderation in supply growth and pick-up in demand. OR increased to 64% in fiscal 2017 while demand grew at 7%, better than the inventory growth of 4%.

 

Addition of supply and slowdown in demand from fiscal 2014 to 2016 led to a stable average room rate (ARR). With the improvement in demand, but intense competition and demonetisation, average room rate (ARR) growth remained muted at 1% in fiscal 2017. Revenue per available room(RevPAR) grew by 4% during the same period, backed by improved demand and lower supply additions.

 

Impact of Goods and Services Tax (GST) on hotel industry

 

The impact of GST is expected to be neutral as, post the implementation of new tax slabs, state-level taxes (luxury taxes) have been removed from the system. The luxury taxes were as high as 15% in New Delhi and as low as 5% in Noida, for cities. As per the new tax structure, rooms with a rateranging between Rs 2,500-7,500 will be taxed at 18% and rooms with a rate of more than Rs 7,500 will be taxed at 28%. As per CRISIL Research, overall tax burden on the consumer has reduced with the introduction of the one-tax system and no impact on demand is expected on the industry as a whole. However, with premium hotels falling in both tax slabs, we can expect slight shift in demand at the property level but within the same category.

 

Amendment in the liquor ban law to benefit hotel players

 

From April 1, 2017, premium segment hotels, which fall within 500 m of a national highway or state highway, were directed to stop selling/serving liquor on account of ban on sale of liquor imposed by the Supreme Court.

 

In August 2017, with the court lifting the ban and allowing all liquor stores on highways within municipal limits to sell liquor, hotel players were relieved, as loss of business on account of liquor ban was impacting revenue of major hotel chains in India.