Occupancy at LaLit falls after breakup with InterContinental

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Hotel finding tough to find customers willing to spend high prices

Five-star hotel chain LaLit is facing a challenge in earning high revenues especially at its key properties in Goa and north Mumbai, after its promoter, Jyotsna Suri-led Bharat Hotel’s breaking up with InterContinental Hotels group, according to top consultants and analysts.

With the LaLiT chain not being aligned to any international hotel operator ensuring enough customers who are ready to pay the high prices that LaLiT aims to command has proven to be a tough task. Similar-sized chains such as ITC and Leela both have an affiliation with an international hotel network with Sheraton and Kempinski, respectively.

“The two flagship hotels — LaLiT at Andheri east, Mumbai and the hotel-cum-service apartments and the Goa luxury resort are both running at occupancies of less than 50 per cent average for this year and revenues per available room night (Revpars) well below five star peer set,” said a consultant with a leading global real estate solutions company. But, Samil Malhotra, vice-president, sales and marketing of the Lalit Suri Hospitality group told Financial Chro­nicle in an email response, “The occupancy and the room rates have seen continued gains from both the domestic and the international traveller in both business and leisure segments. “There has been a growth of 11-15 per cent in our occupancy as compared with previous year. Also, I believe that this will gain momentum in 2013.”

“Not enough money has gone into maintenance. The challenge is bringing demand into the hotel. Also, they are not the best of operators since most smart, talented professionals don’t see it as their first port of call,” said a consultant with a global consulting firm who did not wish to be named.

The Lalit Mumbai Hotel houses 368 rooms spread over seven floors and include 30 suites of four different types.

According to a rating rationale by Credit Analysis & Research (CARE) In FY11, Bharat Hotels had registered a total income of Rs 404 crore and net profit of Rs 17 crore. But in FY12 the company’s provisional consolidated total income fell to Rs 381 crore and it made a net loss of Rs 4 crore. As a result, CARE downgraded the rating assigned to the company’s long-term bank facilities by two notches to BBB+ earlier this month.

“Due to decline in operating income, fixed nature of expenses and increase in the interest expense, Bharat Hotel’s profitability margins declined substantially during FY12. This coupled with ongoing capex plans (on a consolidated basis) and high debt repayments led to a strain on the liquidity situation during the year,” said CARE rating rationale.

“The revision in the ratings takes into account the decline in the operating performance due to increasing competition across all locations. The decline in the income was due to increasing competition leading to decline in the occupancy and Revpar. BHL increased its room rental at most of its key locations (Delhi, Mumbai and Srinagar) during FY12, which resulted in a sharp decline in the occupancy and Revpar,” said CARE in its rating rationale.

As the US economy struggles for recovery, Indian GDP growth slows, companies have cut down on business travels and tourists are selective about their stays. “Many tourists are switching to service apartments as travellers have become cost-conscious. They shift to alternative accommodation options to cut costs,” said Sid Narang, co-founder and chief executive of RatedApartments.com, a firm that offers a platform for property owners to reach out to customers.

The growth in foreign tourist arrivals (FTAs) has slowed down to 3.4 per cent during the first half of first half of FY12-13 vis-à-vis a healthy growth of 9.3 per cent witnessed during the year ago period. “The performance of premium hotel segment is directly linked with the inflow of foreign tourist coupled with corporate spending.

Accordingly, due to sluggish demand scenario alo­ng with notable capacity addition, the operational performance of premium hotels is expected to remain subdued till FY14,” forecasts CARE.



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