India's Hotel Industry Shows Early Signs of Recovery

Vacation News » Vacation & Leisure Real Estate Edition | By Michael Gerrity | March 4, 2010 11:11 AM ET

(LONDON, UK) -- STR Global reports that the health of India's hotel industry is returning, according to new data released this week showing a concerted upward trend and recent positive year-on-year growth in revenue per available room (RevPAR).

India had previously experienced 14 months of RevPAR declines. After years of double-digit growth, the worldwide economic downturn and the tragic terrorist attacks in Mumbai led to performance declines and double-digit misery.

But December 2009 and January 2010 saw a return to significant year-on-year increases, in large part due to favorable comparisons to the weak performance posted in the previous year. The recent results also were boosted by a 21-percent rise in international tourist arrivals, which highlights an overall quarterly increase of 6.9 percent after four consecutive quarters of year-on-year declines. (Source: UNWTO World Tourist Barometer)

India Market Performance (percentage change, year on year)

Such improvement in international tourism arrivals has come as fears about the spread of the H1N1 flu epidemic have begun to fade. The impact of terrorism also is lessening despite the recent bombing in Pune in mid-February in which at least nine people died. However, several countries, including the U.K., the U.S. and Australia still have issued strong warnings to their citizens, urging them to observe high vigilance and to keep a low profile if visiting India.

Factors working in favor of India's hotel market include forecasted economic growth of 8.5 percent ± 0.25 percent for 2010-2011 (Source: Ministry of Finance, Economic Survey 2009-2010), the Commonwealth Games hosted by Delhi during October, and the trial-run of a "visa on arrival" scheme for visitors from Singapore, Finland, New Zealand, Luxembourg and Japan who plan trips on short notice.

"Whilst the prospects for India appear promising, make no mistake the last year has been a difficult one", said Elizabeth Randall, managing director at STR Global.

The table below shows the extent of these difficulties with data taken from STR Global's Indian database of 240 hotels representing more than 35,000 hotel rooms.

Market Performance - Selected India Cities (Percentage Change 2009 to 2008, Indian Rupees)

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