India’s hotels are heavily dependent on F&B as a revenue generator, and have a significant opportunity to boost foreign and leisure demand, according to findings from the 21st edition of the Federation of Hotel & Restaurant Associations of India (FHRAI) survey report.
The report, produced by STR and Horwath HTL, is based on survey responses from 475 hotels comprising 36,029 hotel rooms for the 2017-18 financial year.
“Overall, hotel performance in India is thriving with India’s macros, which have been intact and looking up all through the year,” said Vidhi Godiawala, STR’s business development manager, Central & South Asia. “The hotel industry is riding on the back of the country’s resilient growth story with demand seen picking up from domestic travellers. With more disposable income and a rising middle class, Indians are travelling now more than ever before. And this reflects not just in the report’s KPI findings, but also the impact of F&B consumption as an overall contributor to hotels revenues.”
The report revealed that F&B and banquet operations contributed 42.3% of hotel revenue. Interestingly, revenue contribution from F&B outlets increased for the four-star and lower category hotels. This appears to be a contradiction to the expectation of lower-tier hotels being more select/limited service in character combined with lower rates. On the other hand, these figures reflect the F&B revenue potential in markets outside of the cities.
Revenue from F&B outlets made up 37.8% of total revenue in hotels with up to 50 rooms. This is higher than the total F&B contribution (outlets plus banquets) at hotels of larger size. Together with banquets, hotels with up to 50 rooms gain half of their revenue from F&B operations, the report showed.
Foreign guests represent only 22.8% of total hotel business. Goa and Mumbai are just past the 30% mark in terms of share of foreign guests. In Delhi, the number is higher, but still below 40%.
Also reflecting opportunity for development, the leisure segment currently represents just 41.5% of the country’s overall demand.
Supply increases in recent years have led to lower average daily rate (ADR). Specifically, ADR for five-star, deluxe hotels was below Rp9,500 (US$134), while five-star and four-star hotels reported ADR of Rp5,700 and Rp4,100, respectively.
These figures reflect India as a very affordable destination, although tourism numbers have not grown in a commensurate manner.
RevPAR for chain-affiliated hotels is 2.09 times the RevPAR for independent hotels.
Gross operating profit levels for 2017-18 remained comparable with 2016-17, but EBITDA margins are lower on account of higher management fees and other fixed charges, which is representative of a larger sample of branded management and franchise properties in the 2017-18 report.