Hotel companies are set to increase room rates by up to 20% as the business season kicks in a few weeks from now. Certain key markets are expected to see a higher double-digit increase in room rate, with the national average being between a high single digit and a lower double digit number.

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Speaking with DNA Money, Patu Keswani, chairman and managing director, Lemon Tree Hotels Ltd, said absorption of the massive hotel room supply across India is still in process.

“This year, pricing will go up 15-20% in select markets only. Rates will go up between 7% and 15% in some markets while it will remain flat or increase marginally in a few other markets.”

For instance, Delhi will see a considerable hike in room rates as supply has been absorbed there, while Jaipur and Ahmedabad may not see a significant price hike, he said. “Also, hotels in the Hinjewadi area in Pune will not see a price hike, but city centre hotels will hike rates. Players in different markets will adopt a different re-pricing strategy based on conditions there,” said Keswani, adding that over the next two years all the new supply of hotel rooms across the country will get absorbed.

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Experts said hospitality markets like Delhi, Gurugram, Mumbai, Bengaluru and micro markets in cities like Hyderabad will see a higher double-digit rate increase. In Goa it will be a function of how pricing (combination of air-tickets and hotel stays) compared to other options such as Bangkok and Dubai.

This summer was bad for the Goa market as compared to the previous year due to new hotel room supply and a drop in demand. In fact, the combination was a double whammy. After floods, Kerala is in a rebuilding stage, so a price hike situation is unlikely there while Chennai will witness a marginal increase in room rates.

Room rates have started rising in some markets this month itself, according to Ajay K Bakaya, MD, Sarovar Hotels and Resorts.

Source: DNA Money