Leisure hotels prosper, business hotels feel the pain in India

Leela Mumbai Room Rates, Occupancy

Leisure hotels in India seem to be doing very well, going by annual numbers from The Leela group, while the slowdown in economic growth seems to be taking their toll on business hotels.

The annual investor presentation by Leela, one of India’s biggest luxury hotel chains, brought out a clear dichotomy in growth between the two categories. Hotels located in holiday destinations showed consistent and steady increase in room rates, while those near business hubs showing a marked decline.

Among the hotels owned and managed by the Leela, Average Room Rent (ARR) showed increases in Goa, Udaipur and Kovalam during each of the last five years, while those in New Delhi, Gurgaon, Mumbai, Bangalore and Chennai mostly saw declines.

Leela Chennai

In the big city hotels, the average room rent are going down whereas leisure hotels of major tourist destinations see more demand and hence reap more profit. Gross profit margins of hotels in Udaipur and Goa have crossed 40% on a gross basis, while that of the Leela Mumbai fell steadily to 3% for last financial year from 25% five years ago.

The Indian economy has been seeing a decline in economic growth over the last few years. This seems to have affected business travel inside the country, in turn hurting hotel rents in cities like Bangalore, Mumbai, Delhi, Gurgaon and Chennai.

leela-goaOn the other hand, Leela’s hotels located at tourist destinations are in more demand and their average room rents have been increasing year after year as the number of tourists from India and abroad are increasing.

The Average Room Rent for the Leela, Goa increased from Rs 13,880 five years ago to Rs 17,250 last year, according to the presentation. Similarly, the ARR for Udaipur increased by Rs 7,139 to Rs 26,229 per night.

In comparison, average room rents at Leela’s Chennai property fell to Rs 6,681 last year from Rs 8,924 four years ago, while that of Leela Gurgaon fell to Rs 8,658 from Rs 9,746 five years ago.