Domestic tourists drive two-star hotels

Dwindling foreign tourists have hurt the business of high-end hotels, but an increase in domestic tourists has boosted the business of two-star hotels. According to a research by hospitality consultancy firm HVS, the revenue per available room (RevPAR), a parameter of how well a hotel is able to fill its rooms, in the two-star category increased by 10.4% in FY13 year on year. This is favourable for companies such as Indian Hotels (Ginger brand), The Byke Hospitality, Savera Industries, Viceroy Hotel and Kamat Hotels, which have presence in the mid-and small market segments. Two-star hotels achieved the growth by increasing average room rate by about 15%, helped by a 20% increase in domestic tourists in FY13 year on year against a 2.9% increase in the arrival of foreign tourists.

Of the total proposed room supply in the industry, about 60% is in the mid-and-small budget category. Given this, hotels in the mid-and-small segments will continue to benefit from increase in domestic tourism.