Hotel Industry Prospects in Gurgaon

The years 2007-08 and 2008-09 were boom for the hotel industry in national capital region of Delhi. The sector began the year 2008 on a strong note. Rising tourist inflow, higher occupancy and room rates continued to benefit the hotel players. In the first four months of the year, the tourist arrivals were higher by 11.7% YoY. Existing hotel companies, new foreign players and real estate players continued with their expansion plans. Prospects were looking good, until the sector faced terror attack in Mumbai and recession hit.
The worst financial crisis in many decades, high oil prices and a slew of militant attacks hit the hotel industry. Often described as a “fragile” industry, the demand for travel is highly susceptible to events like economic slowdown, wars, disease outbreaks and terrorism. When the Indian tourism and hotel industry had just started gaining recognition worldwide, it was laid low by a double whammy. The first being the global credit crisis and the second, the recent terror attacks on the iconic hospitality landmarks; the ‘Taj Mahal Palace and Oberoi Hotel’ and the ‘Oberoi Trident’. Nearly 40% of the annual revenues are expected to be lost on account of the recent crisis.
During 1HFY09, lower corporate spending, fluctuating dollar and opening of credit crisis did impact occupancy rates in some cities like Bangalore, Pune, Hyderabad and Chennai. The room rates however, remained high. While the actual number of tourist arrivals has increased, the YoY growth is on the lower side. While during 2007, a 16% YoY growth was seen in tourist arrivals during the first 8 months, the same stood at 10% YoY this year, indicating slowdown. According to the Ministry of Tourism, October 2008 saw an increase of just 1.8% in the number of foreign tourist arrivals compared to the same time in 2007.With the latest terror strike (26/11) during the onset of the peak season, things got murkier. This prompted the Indian government to ask hotels to slash their prices in