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Q1’CY13:Marginal growth;outlook optimistic

The first quarter of 2013 has continued to garner mixed responses from the Indian tourism and hospitality fraternity. While the government is wading through allegations of a dip in inbound numbers and tour operators are dealing with a decline in travel demand, the travel trends recorded are a silver lining for the remainder of the year. Similarly, while some of the hotels have witnessed a stable occupancy and RevPAR, others have witnessed a dip in these numbers. Despite no solution yet to the aviation industry’s issues, some of the major airlines launching one-way discounted fares for domestic destinations for customers, hotels and tour operators, gained a lot of momentum in the first quarter of the calendar year 2013. The lack of mention of the tourism industry in the Union Budget 2013-14 also left the industry in exactly the same place it has been for years so far.

While the dispute on whether the first quarter indicates a healthy year to come or not continues, T3 spoke with the industry to get their views.

 
Inbound arrivals marginally up

Serious concerns were raised on foreign tourist arrivals during the first quarter of this year. According to a random survey undertaken by industry body ASSOCHAM’s Social Development Foundation (ASDF), foreign tourists’ inflow into India have registered a significant drop of 25 per cent in the last three months, that too in the busy tourist season after unfortunate incidents reported internally in India.

Rejecting ASSOCHAM’s study completely, Union Tourism Secretary, Parvez Dewan said, “Foreign tourist arrivals grew by 2.3 per cent from January to March and the Foreign Exchange Earnings from tourism rose by 20.5 per cent in rupee terms and 11.6 percent in dollar terms.” Union Tourism minister K Chiranjeevi said that the recent incidents of violence against foreigners may have a short term impact but there is no dip in foreign tourist arrival. “The recent data did not show any dip in the number of foreign tourist arrivals and the inbound arrival is very much positive. We expect a good year ahead,” the Minister said.

However, experts of the industry do not seem to be endorsing the Minister’s opinion. A single digit growth of 2.3 per cent is as good as negligible growth. They opine that the inbound arrivals may not see substantial growth this year. There has been a drastic fall from the previous years with growth being at 12- 14 per cent earlier.

 
Occupancy remains flat

Vivek Nair, President, Federation of Hotels and Restaurants Association of India, (FHRAI), and CMD, The Leela Palaces, Hotels and Resorts, said that the performance of the hotel industry has been mixed. “The beach resorts in Goa and backwaters resorts in Kerala witnessed 100 per cent occupancy. Hotels of Rajasthan, which is mainly dependent on US market, still not recovered and yet to be back on 2005-06 level. Overall, occupancy at hotels in Q1 this year has been either at par with last year’s level or even a bit down,” Nair said. He also lamented that India has been losing opportunities due to scarcity of hotel rooms. “There were four million tourists who wanted to visit Egypt but could not go there due to prevailing problems there. These tourists could have come to India but paucity of rooms did not allow them to come,” he added.

Nakul Anand, President, Hotel Association of India (HAI) and Executive Director, ITC Ltd, however, was optimistic about the performance of hotels. “I am optimistic about hotel’s performance and hope business environment will be much better in the third-fourth quarter this fiscal,” Anand said. Rahul Pandit, President and Executive Director, The Lemon Tree Hotel Company, echoes this opinion. “In 2013, the industry should focus on products, pricing and distribution to increase topline contribution from the domestic market. If the government maintains momentum on the recently announced policy realignment initiatives and is able to rein in inflation, we could expect an upturn post FY Q2,” he said. The government has termed the shortage of branded hotel rooms in the country as an acute shortage. It estimates an additional need of 180,000 branded hotel rooms in addition to existing 128,000 rooms now, in order to increase India’s share of global inbound tourists to one per cent from current 0.6 per cent by 2016-2017.

 
Emerging trends indicate mixed performance

The first quarter of 2013 also witnessed new emerging trends and travel patterns among the Indian travellers - both in India and outbound. Vikram Madhok, former Chairperson of World Travel & Tourism Council, India Initiative (WTTCII) and MD, Abercrombie & Kent- India, is optimistic that 2013 will be a better year for Indian tourism industry. Vishal Suri, Dy. COO - Tour Operating, Kuoni India, said, “With increasing disposable income level, international travel has come within the reach of majority of travelers from tier I and tier II cities. We have witnessed a substantial increase in number of travellers opting for Ireland, New Zealand, Australia, Sri Lanka and South Africa as preferred tourism destinations in the first quarter of 2013.” He further added that FIT market is growing considerably as Indian travellers are evolving and prefer exploring mono destinations instead of clubbing multiple destinations in one holiday.

Agreeing with Suri, Madhav Pai- Director, Leisure Travel (Outbound), Thomas Cook (India), also stated that Thomas Cook has been witnessing strong demand from tier I and II cities. “Our regional tours play a significant role as here the product rather than price is what is important,” he stated, adding that Thomas Cooks’s volume group traveller markets have been impactful to their growth story for Q1.

Even for the international hotel chains like Starwood, Accor, Carlson, InterContinental and Fairmont, among others, the contribution from the Indian market to their overseas properties has consistently been growing. Some of these chains have now dedicated personnel to take care of the outbound sales. Moreover, almost all foreign carriers consider India as a strong feeder market. Airlines such as Emirates Airlines, Singapore Airlines, Malaysia Airlines and Thai Airways etc. carry 50 per cent of more of the Indian traffic beyond their respective hubs.

Karan Anand, Head, relationships, Cox & Kings, believes that the travel pattern of Indian travellers have changed over the years, though destinations may remain the same, “Kerala is popular, but Indians and tourists are moving towards homestays. Similarly, in the first quarter we have noticed that there is demand for Festival Tourism. Every state organises festivals in their respective regions and these are getting popular. The famous ones such as the Puskhar Fair or the Elephanta festival are getting even more popular. For example, the Kutch Festival, Island Tourism Festival in Andaman and Nicobar Island, International Kite Festival in Gujarat and the Goa Carnival among others are very famous. Beginning of 2013 also witnessed a rise in the MICE travel in the Indian market.”

Sandeep Dwivedi, Chief Commercial Officer, InterGlobe Technology Quotient, said that the growth in 2013 will be determined by the rate at which supply is inducted in the marketplace. “It is expected to be slower than what we have seen in the past few years. Customers can now be seen maturing and evolving with time. With improvement in per capita income, and increased spending by customers, the Indian travel sector is expected to grow faster than most countries around the world.”

 
ARR and RevPar decline; domestic tourism gains momentum

Giving a hospitality perspective, Stefan Radstorm, General Manager, Grand Hyatt Goa stated that the property has targeted all the segments across the board from MICE, weddings, leisure to charters and corporate FITs in the years since its launch in August 2011, owing to its large inventory and banquet facilities. Jagan Lacsher, General Manger, Pullman Gurgaon Central Park, revealed that demand has been able to maintain its pace in Gurgaon. “Despite new inventories coming in last year or so, there hasn’t been any major impact on ADRs . Our industry reports also indicate that ADRs are under pressure but there isn’t a substantial reduction. I see some correction in rates in Q3 and Q4. Rest of the year follow it usual trend,” he added.

While some have witnessed a rise in their business, many have faced a downturn. Prerna Mehrotra, Cluster Revenue Manager, Marriott- India said, “The hotel recorded a drop in Revpar of about 15 per cent behind last year Q1, the drop was primarily driven by decline in ADR to the tune of 10 per cent v/s last year. Hence the hotel has registered an overall decline in revenue by 16 per cent from last year, which is in similar trends to the market.” She further added that rate fluctuations have increased as compared to last year, in lieu of new inventory opened in the city. “The ADR across the market has seen a downward trend with double digit declines recorded in Q1. This is further expected to decline with more hotels opening in Delhi-NCR.”

Sanjay Kaushik, GM, Radisson Blu Hotel Metropolis Rudrapur also shared the same sentiments. “We have seen a 10 per cent dip in Revpar (While the inventory has gone up by 24 keys in the current year) ARR has seen a growth of 19 per cent over the last year.” Ankush Sharma, General Manager, Courtyard by Marriott, Chennai informed that Chennai has seen a decline in ADR and RevPAR since 2011, which has impacted the hotel. “This trend has continued in the first two months of 2013, however the hotel has been successful in growing the RevPar Index considerably vis a vis competition by a significant margin.”

Moving forward, Dwivedi believes domestic tourism is likely to fuel hotel business in India as a larger number of hotel companies are working towards offering the best budget deals to customers. “The contributions of international v/s Indian markets is approximately 60 per cent domestic – 40 per cent international guests. The main markets that have contributed to the growth is Delhi, Chandigarh, Gujarat – Ahmadabad, Mumbai and some pockets of South India as well,” shared Radstorm. Courtyard by Marriot, Chennai has also shown similar results informed Sharma. “The contribution of Overseas Markets Vs Domestic Markets has always been in the rate of 30 per cent Overseas Market Vs 70 per cent Domestic Market. The main Indian cities which have helped contribute to the occupancy in Q1 are Mumbai, Delhi and Bangalore,” he said.

 
Discounted offers by airlines

The first quarter saw intense war over air fares with Indian airlines competing with each other to offer low ticket prices. While Jet Airways offered 20 lakh seats at Rs 2250 for travel anytime till December 31, rival Spicejet and IndiGo also launched similar discounts for their passengers. Spicejet had announced a similar scheme in January offering 10 lakh seats for Rs. 2013 for travel between February and April, which could be booked over three days. Experts in the aviation industry feel that 2013 will be all about exciting offers to stimulate the market. Air India also offered a discount of up to 40 per cent on one-way regular fare charged on its domestic flights.

 
Conclusion

Despite the debate on whether the Q1 has been successful or not, the industry by and large expects a good year ahead. Positive traveller trends, marginal, if not healthy, increase in tourism and occupancy and the growth of tier I and II markets can be taken as an optimistic side for the remainder of the calendar year, with hope that the new financial year will see healthy bottom lines as well.

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