International operations remain a drag on Indian Hotels

Luxury hotels company Indian Hotels continues to struggle with its loss-making international operations, which is now weighing heavy on its consolidated business and is a concern for investors.

The stock of Indian Hotels has been the worst performer among falling luxury hotels shares. In the past three months, the company's stock has shed close to 14.4%, while its peers such as EIH and Hotel Leela Ventures have shed 9% each.

In FY12, as also in the past four years, the company's international operations pulled down its profits substantially. Its subsidiaries, which include its international operations, reported a net loss of Rs 132 crore in FY12, while its standalone net profit was Rs 145 crore. Consequently, the company's consolidated net profits plummeted to Rs 3 crore.

On the international front, the company's US property continues to lag its peers in terms of average room rates. At a time when most of its peers in the US are quoting average room rates of close to $850, its Pierre property in New York, is quoting $498, a discount of 42%, according to an estimate. Most of its other overseas hotels have shown an improvement in average room and occupancy rates.

Back home, the company is grappling with weak demand, given the oversupply of rooms. In FY12, Indian Hotels added 6.5% more rooms to its present inventory of 13,629 rooms.