While occupancies have improved, hotels are yet to recover the tariff they enoyed in the pre-recession days, says Priya Paul, chairperson, Apeejay Surendra Park Hotels.
In an interview with Ranju Sarkar, she explains why the group was conservative (it has just added 9 hotels in 40 years). With a PE partner in Credit Suisse, Paul is trying to step-on the pedal and have 20 hotels by 2020. Paul was joined by MD Vijay Dewan in a conference call.
Has business picked up after the recession? If you were to look at life before and after the recession, how have been the occupancies & average room rates (ARR)? Can you give us a graph, which plots both, over a three year period?
The immediate effect of the recession or events like 26/11 is a drop in occupancies across the country. Our teams countrywide worked hard to build those occupancies in the subsequent years. We were successful in doing so with some properties like Kolkata and Vishakapatnam. Our food and beverage revenues grew slowly.
Dewan: In the first two years of the recession, revenues have declined by 30 per cent but now we are bouncing bank. In the first quarter of this fiscal, revenues have gone up by 16.5 per cent. In the first of recession, revenus declined by 10 per cent, and in the second year by 15 per cent, while the overall decline was around 30 per cent.
We used the recession as an opportunity to improve efficiencies of our operations as well as as on the capital side. We also used the opportunity to grow; we have built (a new hotel in) Hyderabad, we are building (a new hotel) in Pune, and we have been able to add properties on management contracts. We have become a 10-hotel chain.
Quarter-on-quarter, the occupancies have increased by 9 per cent for us. It used to be 58 per cent in the April-June quarter last year; this year, it has moved up to 67 per cent in the first quarter of 2010-11.
Have business improved to pre-recession days or is it yet to recover?
Occupancy-wise, it is building up but room rates are yet to reach pre-recession levels. It depends on the demand-supply situation in different markets, but by and large, it is still climbing up. Hotels revise rates in September-Ocotober, and they will do so in a month. Bulk of our rates are negotiated rates, which needs to increase.
But is the demand strong enough for hotels to increase rates upwards?
Input costs have gone up considerably for all companies in the economy, whether we are dealing with food and beverages or rooms. I think the indian economy has proved to be resilient that underlines the India story. We see demand strengthening every quarter and we see room rates moving up from October, November.
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