The top two hotel markets in India, Delhi, and Mumbai have hit 80 percent hotel occupancy in Q1 of 2018. The rates are highest in over a decade, signaling a recovery in the stagnant industry. In the year 2016-17, the total occupancy in Delhi was 70 percent. During the same time, 75 percent of Mumbai hotel rooms were occupied.
India’s growing travel market is the reason behind this surge in booking. A growing number of leisure and business travelers in the two cities is demanding more such rooms. However, we must also note that the rate of addition of new hotel rooms has also slowed down during the period.
Demand is growing
Arif Patel from Accor Hotels suggests that the dramatic decrease in supply with increasing demand is the reason behind this successful number. He said, “Supply (addition of new hotel rooms) has slowed down dramatically while demand is growing. A city like Mumbai has almost no new hotel coming up this year and so is the case with Delhi. This is unheard of. There might be some openings here and there, but these do not even add a single percent to availability.”
An 80 percent occupancy suggests that the hotel rooms that hotel rooms were booked for at least five to six days in a week. In Mumbai alone, the number went up to 78 percent in Q1 on long weekends. “Our Mumbai hotels are trending higher than 78 percent. Occupancy is not an issue unless there is any disruption. This is going to be a good year,” Patel said. He added, “I do not think there will be many development opportunities in Delhi due to the scarcity of land. We need developers and are willing to partner them.”
Patel’s forecast for Delhi seems grim but the capital city still hosts about 14,296 branded hotel rooms (excluding popular hotspots Gurgaon and Noida which have another 6,700 rooms), the largest in India. According to an HVS report, Navi Mumbai has 13,494 rooms and Bengaluru has 11,995 rooms. Both markets have shown smaller annual growth rate in hotel rooms. Against a CAGR of 5.3 percent, new hotel rooms in Mumbai grew at 3.4 percent while in Delhi, the figure stuck to merely 1.1 percent.
Q1 was good
Raj Rana, CEO (South Asia) of Radisson Hotel Group said that the rooms were frequently sold out during Q1 of 2018. He said, “Levels in excess of 90 percent were tested. But that is where most of the good news ends.” The price of branded hotel rooms has also dropped significantly during this time and the average price at the end of March was only Rs. 4,800 per night.
Rana also mentioned that the prices of hotel rooms will eventually rise as the land is scarce and new construction laws and zoning could make new hotel room construction more difficult. New travel startups, an increased interest in weekend getaways etc. is also helping the hotels fill up the rooms, especially because they are available at discounted prices. However, as the initial charm passes by and prices increase, the occupancy rate will undergo another change.