Despite the festive season being round the corner, India’s travel and tourism industry is seeing subdued demand for the ongoing season. Traditionally, October to March is considered a high growth period for the industry when hoteliers, tour operators and other stakeholders notch profits to make up for the losses during the lean season. However, insiders believe that higher air fare and excessive supply of hotel rooms in major cities, resulting in a falling occupancy, are making the tourism scenario worrisome.
The growth in foreign tourist arrivals slowed down to 6.2 per cent between January and August this year from the 10 per cent in the same period a year ago. Experts in the industry are of the opinion that the overall demand from the domestic travel segment will remain flat this year due to a combination of factors that include higher taxes. Normally, bookings for holidays and festive seasons are done three to six months in advance and easily record a 20-25 per cent annual growth. However, the outlook for the current season is not encouraging, said one of the hoteliers. And, this in a situation where the rupee has depreciated over 20 per cent in the last one year, fueling the speculation that inbound arrivals will witness substantial growth.
If these were not enough, rising air fare is further denting the profitability of hotels as a majority of travellers are opting for three and four star category hotels instead of premium properties to offset the hike in air fare. This has had an effect on the occupancy levels of premium establishments. According to Crisil Research’s recent report, the profitability of premium hotels is expected to plunge in 2012-13 and 2013-14. “Occupancy rates of premium hotels will fall from 64 per cent in 2011-12 to 56 per cent in 2013-14, due to large-scale room additions and the global economic slowdown. Operating margins will drop to just over 16 per cent in 2013-14, the lowest in 10 years,” the report adds. International travellers contribute around 65 per cent of the revenue for major hotel chains running premium segment properties.
Industry players expect a further hike of 10-15 per cent in air fare by the end of October during the peak festive season. We feel the fluctuating situation in the tourism industry during the last three to four years is emerging as a deterrent for the overall tourism growth. Keeping all these factors in mind, will we be able to achieve the targeted inbound arrival of 10 million by 2017 is a moot question.
