Indian hotels industry in nascent stages of recovery: ICRA

ICRA has come out with its report on the Indian hotels industry. The research firm expects the sustained high occupancies of the past 18 months to lend some pricing power to the Indian hotels industry during the current fiscal (2011-12), which in turn would dilute the impact of increasing fuel, food and employee expenses.

Summary The Indian hotels industry is still in the nascent stages of recovery and is yet to make the transition from an occupancy-led cycle to one supported by rising average room realizations (ARRs) We believe sustained demand and a relatively longer booking window point to the return of some pricing power during the current year. However, supply pressures in some cities are likely to negate the impact of the same and also prevent any steep increases in room tariffs. Weak macroeconomic signals emanating from the USA and Europe, expectations of the domestic corporate sector reporting a lacklustre performance in fiscal 2011-12 (year to March 31, 2012), rising interest rates, increase in food and fuel costs, and unrest in West Asia continue to cloud the near-term prospects for the Indian hotels industry. The longer-term prospects of the industry however remain robust, given that it can absorb significant capacity additions in a scenario of robust economic growth; besides, the industry

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