Hotel companies: Soaring occupancy, room rates to make growth

With increasing real estate prices, hotel companies in India are escalating attendance in tier-II and tier-III cities by budget segments and midmarket.

Low-priced hotels in towns and urban cities will notice an escalation of approximately 50% in the coming four years, consulting and research firm HVS stated in a report. The standard per main cost of mid-market hotels and budget are about Rs 30-50 lakh as compared with Rs 85 lakh to Rs 1 crore for top class and exclusive hotels.

Budget hotels manage and become profitable quicker than their leaders in the posh space. Such an arrangement does better work not merely in terms of investment, but in terms of profits and returns also. To know the growth opportunity in the economical hotels space in towns and smaller cities, many foreign players have engaged themselves with such budget hotels to expand presence in India. Intercontinental Hotel Group presently signed a mutual venture with India's Duet Hotels to commence the Holiday Inn brand.

Rising occupancy rates and income per room and small debt will pull growth of budget hotels in the approaching years. Mid-sized hotels have a standard occupancy rate of 68% and returns per room of Rs 4,624. Most of these companies are working at little debt assited by a fresh business model and reorganizing exercises.

The increase in foreign tourist onset in India will also improve revenues for budget hotels in smaller cities. Government data showed that foreign tourists coming in May were up to 7% from the preceding month. There seem to be huge profit in such hotels in the coming years.