While the Rupee depreciation has dampened the spirits of the Indian outbound industry, the inbound sector, which had been facing flak in the face of recent negative events, took a turn for the better in the third quarter of the calendar year 2013. India having become a cheaper destination for inbound travellers in the light of European and American destinations becoming more expensive, has led to the travel industry witnessing higher demand for inbound travel, and given them a glimmer of hope for better inbound business going forward. Currently, foreign tourist arrivals in India has been growing at a CAGR of about 7 per cent which is higher than rate of tourist arrivals across world over which has been growing at about 3.8 per cent and overseas tourism in the Asia-Pacific region that has been growing at about 6.6 per cent. The hotel industry also has been grappling with the downturn that has impacted corporate travel. However, the industry is pinning its hopes on the ongoing travel season which is the peak season for inbound and MICE. While domestic business is still their strong suit this year, the Q3 showed inbound travellers’ bookings also adding to their bottomlines.
“This quarter has been a mixed bag with minor top line gains getting eroded by the inflation in costs and reduced traveller spends. We are currently on target for ~70 per cent occupancy nationally, which should approximately give us a 10 per cent premium in most markets. The extraordinary rise in air fares though has removed any rate premium advantage, as the domestic traveller has been forced to spend, thereby reducing the amount available for hotel spends and reducing the length of stay. Metro markets have shown resilience in absorbing increased supply, albeit at reduced rates. This is an early positive sign and augurs well for rate consolidation next year, especially with no massive national supply injections expected over the next 18-30 months,” opined Rahul Pandit, President & Executive Director, The Lemon Tree Hotel Company.
Hotels witness rise in demand
Providing one of the biggest examples of ongoing success in hotels’ business, Shaiful Alam, General Manager, R.K. Sarovar Portico, Srinagar revealed that the property is averaging at 60 per cent occupancy, with India being the main source market..Furthermore, he stated that, provided there are no political issues, he expects the numbers to stay at 60-65 per cent.
The success of a relatively new property in a destination fraught with issues is an ideal window into the rise in demand for the rest of the country. Hyatt Ahmedabad too has seen a steady growth in Q3, fuelled by corporate travellers. According to Girish Ganeshan, General Manager, Hyatt Ahmedabad, the property’s ARR has shown a steady increase in the last quarter.
Suresh Kumar, Chief Executive Officer, Fortune Park revealed that the Q3 performance has been almost stagnant. “While there has been an increase in occupancy, rates have been under stress. Overall, the first nine months of the year have seen a very marginal growth,” he added.
“The 28 Neemrana non-hotel Hotels have consistently performed well in the Q3 of 2013. Although July was a bit slow especially in Uttarakhand, August and September were good months. We have also seen a growth in Ahmedabad, Gwalior, and Rajasthan. While most hotels were complaining of a down, we still experienced an up! However, there has not been any major increase in ARR as we have not increased our rates in 2013,” stated Aman Nath, Co-Chairman, Neemrana Hotels.
As Nath mentioned, destinations such as Uttarakhand were hard hit. As a result, the properties in the state did not witness the success the rest of India started to achieve, both in terms of domestic as well as inbound travel. “The results for Q3 have been affected by the downturn in the domestic economy and also the continued uncertainty in the key overseas source markets. To add to this the wreckage caused by floods and landslides has hurt the Uttarakhand tourism industry in every way possible. While the char dham may take years to recover, even places like Mussoorie and Nainital that were not affected by the disaster are also seeing a steep decline of over 75 percent in tourists arrivals. There is extreme scepticism. We expected higher occupancy and revenues in the third quarter, and expected a weakened rupee to increase foreign visitors to the Indian properties. But the occupancy in places like Dehradun and Mussoorie has gone down by 80 percent. I believe we would be able to improve on that in the fourth quarter, as mostly it has remained a positive quarter for the overall hotel industry,” opined S.P. Kochhar, CMD, Madhuban Group of Hotels.
It is not just conventional hotels that are witnessing a surge in bookings, but also the timeshare accommodations. According to Gaurav Pallial, CEO, Citrus Check-Inns, the company recorded a robust growth in Q3 2013 over the same period last year, with sales up by almost 30 per cent. “In India the timeshare is still a nascent concept. There are some companied who have over promised and now struggle to deliver. Non performance on delivery has resulted in a negative perception in the market. We have built trust and have delivered,” said Pallial.
He further opined that the rising inflation has helped the company’s cost. “People have become more aware of the costs and are willing to invest. They see it now as an attractive proposition. There was a time when Holiday was a luxury. Today’s hectic office schedules and stress have made it a necessity. This business has graduated from being a luxury to a need (still arriving there though). As and when this becomes more pronounced we shall see more growth. To back it India’s middle class continues to grow. Furthermore, rising airfares have only meant that people travel by road,” he added.
There have, of course, been a few properties that have witnessed stagnation or drop in bookings this quarter. The Claridges Hotels & Resorts, for instance, has performed quite well in Q3, but has not recorded much growth over last year, said Oliver C. Martin, Regional General Manager at The Claridges Hotels & Resorts. “Rates have indeed being rationalised, however we have been very steady with rates and have even increased 5 per cent over last year,” he added.
When asked about correction measures that were used in hotels that witnessed a backslide in the Q3 period, Steve Borgia, CMD, INDeco Leisure Hotels stated, “We brought down weekday tariff and raised the week end tariff.Q2 was standstill but Q3 started moving up. Our Q3 of 2013 will be much better than 2012. In fact, there will be a 10 per cent increase. Yes, ARR has dropped. But volumes are up. From 4100.00 of the previous year, we are doing 3600.00.”
Domestic v/s inbound bookings
When asked what their focus has been for the year, most hotels stated that attracting domestic footfall would take precedence over inbound bookings despite the promise that a low Rupee value brings as far as foreign tourist arrivals are concerned. Be it corporate or leisure, all eyes in the hospitality industry seem to be set on the Indian domestic traveller. Raju Bharat, Chairman and Managing Director, Kenilworth Group of Hotels, revealed that the company has seen a surge in domestic bookings. According to him, most of the big players in travel trade have suffered from the de-valuation of Indian Rupee, leading to steep decrease in outbound and sudden increase in domestic traffic.
“80 per cent of our guests are now Indians and we are delighted. We have never positioned our heritage to be showcase first to the foreigners, just because you can fleece more dollars out of them. We have created a niche for Indians at home: affordable, experiential tourism, with 11-tiered pricing for rooms – they pretty much cover the whole range. Neemrana made Indians proud to enjoy their heritage. Our visitors’ book is full of praise from both Indians and foreigners,” said Nath.
Maintaining a balance between the two though, Borgia revealed that, while the thrust on domestic will be as usual, there will be extra effort to reach the inbound market all through October, November and December this year. “2012 was bad for inbound and we are sorry we allowed that. But we are certain that 2013 end figures will be great and we are all set to harness that. After all we are all eating only each other’s pie. Strategies are in place to tap this market,” he added.
Tour operators hope for more
As the adage goes, there are two sides to a coin. While hotels celebrate the upward crawl in numbers, tour operators are a mix bag of responses, with most citing stagnation in arrivals in Q3, but hopes for Q4 to be better in the wake of the weakening Rupee. “The Inbound season is cyclical in nature. The inbound season only begins in Q4 of the calendar year and it is too early to give any answer. Having said that the year 2012 was encouraging for Cox & Kings as we met all our targets set for ourselves in the year,” opined Arup Sen, Director, Special Projects, Cox & Kings.
Sen further stated that the fluctuating Rupee has not had a noticeable impact on inbound numbers. “The rupee has been fluctuating in recent times. While it depreciated against the dollar sharply sometime ago, it recouped some of its losses as well and so we do not see any significant impact. There are two factors at play here. One is those who will embark on their inbound journey will have more discretionary spending power and second is that those who book now will enjoy a slight rate advantage. However, this is not enough to fuel inbound travel,” he added.
Echoing this opinion, Madhavan Menon, Managing Director, Thomas Cook India stated that the Rupee fluctuation is only one aspect of tourism, and there are several others that influence the sector. “I expect that Rupee will impact inbound numbers. If you take a year ago, the rupee was Rs. 53 to US$ 1. It is at 63 today. Rs. 10 is quite a heavy rise. So I think there will be a benefit. We are going to see the inbound tourism grow. I have no doubt about that. We did a dip stick research and noticed that, whenever the Rupee has weakened, the tourist inflow has increased. But having said that, it could take one bomb, one downgrade, one bad politician, to bring it all tumbling down. But I am still keeping my fingers crossed that the numbers increase,” he said.
Sen has, however, begun to witness a trend in foreign tourist demands, which paint a brighter picture for the industry. He commented that people are getting more adventurous and thinking out of the box for India. Customers are exploring new destinations and itineraries through the tour operators, having gained knowledge through online and offline media. “The popular destinations continue to be the Golden Triangle. However, interests in destinations like Kerala have been on the rise. Adventurous amongst them are also undertaking cycling expeditions in Kerala and some other parts of India. Destinations such as Maharashtra have caught the attention of our customers and we believe that in the years to come this will also be a key destination for the inbound traveller.”
Marketing strategies
No extent of the weakening of the Rupee will help booking numbers without a marketing plan in place. Be it social media, direct to consumer or B2B marketing, but having a strong strategy in place is of prime importance if the industry is to further gain momentum in inbound and domestic travel. For JW Marriott Mumbai, the focus remains to increase recall and loyalty amongst target audience, said Hema Hariramani, Director of Sales & Marketing, JW Marriott Mumbai.
“We are an aspirational brand and hence our strategy is to continue to increase visibility in various mediums – print, electronic, online and below the line strategies, where our target customer is. We are very aggressive on our Social Media as well. Given the number of promotions we host at our property, we have a PR agency, a social media agency and an advertising/creative agency on board with us. We also encourage marketing associations as and when we can, with respect to individual promotions,” Hariramani said.
Philippe Charraudeau, Vice President & General Manager, ITC Grand Chola opined that it is very rare that hotels have a potential to become an institution, and the initial response to the hotel by repeat businesses has given us the confidence that ITC Grand Chola will become an institution in time. Hence, he added, the property’s marketing strategy has been woven around the same so that ITC Grand Chola becomes a destination authority, both in the international and domestic markets.
“We are extremely aggressive in online marketing and have also tied up with a company, who helps us with this and covers all technology angles, including social media, SEO etc. We have already adapted ourselves as per the industry,” said Martin.
