Indian Hotel Industry Industry waiting out one of the longest down-cycle

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Indian Hotel Industry Industry waiting out one of the longest down-cycle ICRA RESEARCH SERVICES Corporate Ratings Contacts: Subrata Ray +91 22 6179 6386 subrata@icraindia.

1 Indian Hotel Industry Industry waiting out one of the longest down-cycle ICRA RESEARCH SERVICES Corporate Ratings Contacts: Subrata Ray PavethraPonniah Shreekiran Rao Jaganathan A jaganathan.a@icraindia.com January 2015

com PavethraPonniah +91 44 4596 4314 pavethrap@icraindia.

2 Overview- Industry waiting out the longest down-cycle Industry outlook remains subdued given the anticipated demand-supply gap over the next months Stable to marginally improving occupancies indicate demand growth of around 10% during ; however this trend appears to be geographically concentrated in specific cities like Mumbai Rate integrity continues to be weak as witnessed during the past 18 months; Average Room Rates (ARRs) touch new lows on a month-on-month basis with a steady Rs discount to previous year, although the discount appears to be narrowing DEMAND: Easing visa and policy norms to support inbound demand even as a weaker global economy curtails traveller budget Domestic demand continues to grow at a healthy pace both from the leisure and business traveller; however the global volatile economic scenario makes demand forecasting and pricing the room inventory a difficult task Although easing visa norms and the GoI s focus on Tourism lend credence to a demand pick up in coming months, inbound tourism will be impacted by global economic weakness. The devaluing Rouble and soft oil prices have already hit inbound travellers from oil economies like Russia Outbound tourism continues to grow indicating lost domestic revenue SUPPLY: Premium room supply pipeline continues to be strong: 6,500 rooms to be added during as against 6,800 last fiscal This section details the city and property wise supply addition over the next five years for twelve cities based on the updated status of construction India has over 29,000 premium rooms under construction currently- to be launched over the next six years. Over 30% of this supply is targeted at the National Capital region (NCR). ANALYSIS: Breakeven Revenue per Available Room (RevPAR) stable through the down cycle despite the inflationary environment Despite the inflationary environment and a largely fixed cost business model, luxury hotels have maintained stable breakeven (at the EBITDA level) RevPARs of Rs. 4,200-4,350 between and indicating significant cost control and a lean operating model OUTLOOK: unlikely to post a positive surprise We expect revenues during Q3, to grow by 5-6% aided by modest improvement in occupancies and growing F&B income. While y-o-y operating margins are expected to be stable at 26-27%, operating profit before taxes (OPBT) is likely to fall (y-o-y) marginally to 3% due to higher depreciation and interest charges. ICRA maintains its subdued outlook and growth estimations for the industry at a muted 7-9% during with flat ARRs and 2%-4% uptick in occupancies. FEATURE: Tax burden on Indian hotels This section details the entire gamut of taxes hotels located in India face with an analysis covering the differential tax rates/structures across states An analysis of the top eight hotel markets indicates that the effective taxation varies- the highest is Tamil Nadu at 23.3%, while it is the lowest is Goa at 16.9% Implications of Goods & Service Tax (GST) FEATURE: The Mumbai Hotel market This section details the city s demand drivers, current supply, supply pipeline, status of construction (supported by photographs) and ICRA s projections for estimated operational metrics (Average Room Rates (ARR) and occupancy) over the next three years Page 2

during the past 18 months; Average Room Rates (ARRs) touch new lows on a month-on-month basis with a steady Rs.

3 Subscribe to the full report for the following or more I. Hotel industry trends - ARR and occupancy trends of Indian hotel markets - Demand trends in the hospitality sector - Update on supply in key cities - Breakeven RevPAR analysis for the premium hotels in India - Update on annual and quarterly performance of India hotel sector II. III. IV. Outlook for India Hotel industry for and beyond FEATURE: Tax Burden on Hotels in India FEATURE: The Mumbai Hotel Market V. Brief coverage of following hotel companies - Asian Hotels (West) Limited - EIH Limited - Hotel Leelaventures Limited - Oriental Hotels Limited - Speciality Restaurants Limited - Taj GVK Hotels & Resorts Limited - The Indian Hotels Company Limited - Thomas Cook (India) Limited VI. Annexure: ICRA s Ratings in the Hotels industry Page 3

in India - Update on annual and quarterly performance of India hotel sector II. III. IV.

4 CORPORATE OFFICE Building No. 8, 2nd Floor, Tower A, DLF Cyber City, Phase II, Gurgaon Ph: , Fax; REGISTERED OFFICE 1105, Kailash Building, 11 th Floor, 26, Kasturba Gandhi Marg, New Delhi Tel: Fax: MUMBAI Mr. L. Shivakumar Mobile: rd Floor, Electric Mansion, Appasaheb Marathe Marg, Prabhadevi, Mumbai Ph : /01 Fax : shivakumar@icraindia.com GURGAON Mr. Vivek Mathur Mobile: Building No. 8, 2nd Floor, Tower A, DLF Cyber City, Phase II, Gurgaon Ph: , Fax; vivek@icraindia.com Please contact ICRA to get a copy of the full report CHENNAI Mr. Jayanta Chatterjee Mobile: Mr. Leander Rayen Mobile: th Floor, Karumuttu Centre, 498 Anna Salai, Nandanam, Chennai Tel: , /9659/8080 Fax: jayantac@icraindia.com leander.rayen@icramail.in KOLKATA Ms. Vinita Baid Mobile: A-10 & 11, 3rd Floor, FMC Fortuna, 234/ 3A, A.J.C. Bose Road, Kolkata Tel: / 8839, , Fax: vinita.baid@icraindia.com AHMEDABAD Mr. Animesh Bhabhalia Mobile: & 908 Sakar -II, Ellisbridge, Ahmedabad Tel: /2008/5494, Fax: animesh@icraindia.com HYDERABAD Mr. M.S.K. Aditya Mobile: , CONCOURSE, 3rd Floor, No , Ameerpet, Hyderabad Tel: , Fax: adityamsk@icraindia.com PUNE Mr. L. Shivakumar Mobile: A, 5th Floor, Symphony, S. No. 210, CTS 3202, Range Hills Road, Shivajinagar, Pune Tel : , /196, Fax : shivakumar@icraindia.com BANGALORE Mr. Jayanta Chatterjee Mobile: 'The Millenia', Tower B, Unit No. 1004, 10th Floor, Level 2, 12-14, 1 & 2, Murphy Road, Bangalore Tel: , Fax: jayantac@icraindia.com Page 4

Delhi 110 001 Tel: +91-11-23357940-50 Fax: +91-11-23357014 MUMBAI Mr. L.

5 ICRA Limited CORPORATE OFFICE Building No. 8, 2 nd Floor, Tower A; DLF Cyber City, Phase II; Gurgaon Tel: ; Fax: info@icraindia.com, Website: REGISTERED OFFICE 1105, Kailash Building, 11 th Floor; 26 Kasturba Gandhi Marg; New Delhi Tel: ; Fax: Branches: Mumbai: Tel.: + (91 22) /01, Fax: + (91 22) Chennai: Tel + (91 44) /9659/8080, / 3293/3294, Fax + (91 44) Kolkata: Tel + (91 33) / / / , Fax + (91 33) Bangalore: Tel + (91 80) /4049 Fax + (91 80) Ahmedabad: Tel + (91 79) /5049/2008, Fax + (91 79) Hyderabad: Tel +(91 40) /7251, Fax + (91 40) Pune: Tel + (91 20) /95/96, Fax + (91 20) Copyright, 2015 ICRA Limited. All Rights Reserved. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided 'as is' without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group companies, while publishing or otherwise disseminating other reports may have presented data, analyses and/or opinions that may be inconsistent with the data, analyses and/or opinions presented in this publication. All information contained herein must be construed solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents. Page 5

: + (91 22) 61693300/01, Fax: + (91 22) 2433 1390 Chennai: Tel + (91 44) 2434 0043/9659/8080, 2433 0724/ 3293/3294, Fax + (91 44) 2434 3663 Kolkata: Tel + (91 33) 2287 8839 /2287 6617/ 2283 1411/

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