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Luxury hotels buck trend, register upward room rates

The luxury hotel market is pinning its hopes for an across-the-board revival in the last quarter of the calendar year after GST was slashed to 18% from 28%.

, ET Bureau|
Updated: Oct 07, 2019, 10.54 AM IST
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Luxury hotels in premier business cities such as Delhi, Mumbai and Bengaluru have maintained upwardly stable room rates and occupancies.
NEW DELHI: Despite a slowdown in consumer spending and declining travel in the April-June quarter of the new financial year, luxury hotels in metro cities like Delhi/NCR, Mumbai and Bengaluru in India bucked the trend and continued to maintain upwardly stable room rates and occupancies this year, industry experts familiar with the developments said.

The luxury hotel market is pinning its hopes for an across the board revival in the last quarter of the calendar year after GST was slashed to 18% from 28%. Industry experts had previously said the 28% GST slab on luxury hotels in India made them among the most taxed in the world.

"Luxury hotels in premier business cities such as Delhi, Mumbai and Bengaluru have maintained upwardly stable room rates and occupancies. The recent GST cuts on luxury hotels will further provide a fillip in guests’ expenditure, which will help revenue and margins for luxury hotels in India," said Jaideep Dang, managing director of JLL Hotels and Hospitality Group.

Dang said investors have not shied away from the sector and are looking at buying and developing luxury hotels where hotel operating margins are better on the back of high room rates.

Rajiv Kaul, president of Leela Palaces, Hotels & Resorts, said that while 2019 has had fewer full house sold out days than previous years so far and the pan India trend has been muted, a couple of places have been exceptions. "In Mumbai, Gurgaon and Bangalore the markets and demand have held up. We have seen growth in our Gurgaon and Chennai hotels over last year. Elsewhere, there has been a small decline in revenue per available room. The rates have been under pressure because people have been trading down.”

“The slowdown around the general elections and dry days impacted F&B operations. Quarter one was difficult because of the air capacity getting affected and also because of the 28% GST rates. It was cheaper to go overseas than to Indian luxury resorts in destinations like Goa," Kaul added.


Dipak Haksar, chief executive of ITC Hotels and WelcomHotel, said he is looking at the second half of the year with optimism after the rationalisation of taxes in the hotel sector plus the other initiatives introduced to augment business growth.

While the Oberoi Group suffered a 14% decline in revenue from operations to Rs 289.63 crore for the quarter ended June from Rs 334.96 crore in the corresponding period of the previous fiscal on a standalone basis, owing to factors like declining air travel and reduction of its air catering business, industry insiders said its revamped Delhi hotel and The Oberoi, Mumbai have done reasonably well.

In April this year, French multinational hospitality company AccorHotels, announced plans of launching its uber luxury brand Raffles in India, a development first reported by ET. Accor said it planned to launch two Raffles hotels one in Jaipur and the other one in Udaipur.

Jean-Michel Cassé- COO, Accor India and South Asia, said its two Raffles hotels and a Fairmont Mumbai in Sahar are under active construction and are all on track.

"In fact, just a few days ago, we kick started the construction of Raffles Jaipur. Raffles Udaipur should become operational by quarter four of 2020 and both Raffles Jaipur and Fairmont Mumbai should be up by 2022," he added.


Kapil Chopra, president of the Oberoi Group, who announced the launch of The Postcard Hotel, his new experiential luxury hospitality brand in December last year, said construction is underway for his new hotels in Goa, Ranthambore, Kanha Tiger Reserve and another one on the outskirts of Kolkata.


"The market is robust for leisure luxury hospitality Today, it's 10% cheaper to stay in luxury hotels in India. The 28% tax was ridiculous and it is the most welcome step," he said.



Gaurav Mudgal, director of revenue at Accor's Fairmont hotel in Jaipur said Fairmont has improved its occupancy by 13.5 % and its average daily rate by 7.1% over last year. "In terms of F&B revenue year to date, Fairmont is 16.6% ahead of last year."

Vijay Wanchoo, senior executive vice president and general manager at The Imperial New Delhi- which is cited as Delhi's first luxurious grand hotel said year to date occupancy for the current financial is at par with last year. However Wanchoo said business in terms of occupancies and footfalls has been impacted this year due to various political and economic factors.

"The political tensions between India and Pakistan earlier this year also resulted in advisories being issued by governments of various countries from traveling to this part of the world. The closure of the Pakistani airspace only created more fear in the minds of the travelers resulting in many cancellations from various segments," he added.

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