Commonwealth Games a Big Boost for NCR Hospitality Industry

News Posted - 2010-02-19

The latest figures on foreign tourist arrivals in India suggest that the recent buoyancy in the hospitality and aviation industry may continue in the future as well. According to figures released by the ministry of tourism, revenues from foreign tourists rose to a new high of Rs 7,042 crore during December 2009. Two years ago, the corresponding figure was Rs 5,079 crore. Also, the number of tourists arrivals during the period jumped to nearly 6.5 lakhs from a little under six lakhs two years ago. Foreign tourists account for nearly 50% of the hotel industry’s revenues and are a key revenue driver. The corresponding figure for domestic airlines is in the range of 10-20%.

The rising tide of foreign tourists will further boost hotels and airlines as they are expecting a rise in traffic with the upcoming Indian Premier League (IPL), which kicks off in the first week of March. In the quarters ahead, hotel operators are pinning hopes on business from the Commonwealth Games, which starts in New Delhi in October this year. According to estimates by the Associated Chambers of Commerce, Industry of India (Assocham), the games could result in 10 million additional foreign tourists visiting India.

This sudden inflow of tourists would have a tremendous impact on the entire chain of the Indian tourism industry, starting from airlines to hotels to travel agents and tour operators. Not surprisingly, the stock prices of most tour operators such as International Travel House, Trade-wings and Transcorp International have outperformed the broader market in the past two quarters.

The last quarter also saw strong investor interest in the initial public offer (IPO) of Cox and Kings India, one of India’s largest tour operators. The company did not disappoint its investors and the stock is still up 50% from its offer price. Most leading hotels reported a sharp improvement in occupancy levels and room rates in the December 2009 quarter with maximum rise seen in the Delhi region, which is a hub of foreign tourists in India. According to Indian Hotels Company, the revenue per available room in Delhi region shot up to Rs 9,210 in December 2009 quarter, up 57% from the corresponding period a year ago.

Hotel companies forsee a further rise in room rates in the NCR region due to the Commonwealth Games. There has been a virtual race in the industry to set up properties in the NCR region. Investors need to keep this dynamics in mind while buying into stocks in this segment. Among hotels, the best bet could be companies such as Asian Hotels, Hotel Leela and EIH, which derive a significant chunk of their revenues from the NCR region. In the travel agencies segment, it will be prudent to focus on diversified players — Cox and Kings India, International Travel House and Trade-wings while in the airline industry, Spice Jet and Jet Airways appear to be better bets.

Source:Indian Realty News 19/2/10