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16 hOTELs + rEsOrTs mice, fits push goa post decline in charter movement; national outlook positive The recently released hVs report takes a holistic look at India’s most important cities and how they fared in the recent past. It also gives a detailed insight into the future trends and performance expectations. While strong supply of hotel rooms in the capital will strengthen the upscale and the mid-market segment, the supply is anticipated to be absorbed. We bring you excerpts of the exhaustive report. Key Trends This Section highlights countrywide trends and statistics using data from the past five years' surveys. Subse- quently, the city scenarios are highlighted for the seven major cities and 13 other cities across the country. Indian hotel Industry Performance – Country Trends • Growth in Operating Performance Indica- tors: The average rate registered in 2015-16 was `5,128, the highest recorded since 2009-10. Similarly, the occupancy continued to witness a rise, recorded at 62.1% in the previous fiscal year (Exhibit 1). • Contribution to Total Revenue: The last few years had witnessed a steady decline in the contribution of the Rooms division to the topline. However, 2015-16 did not follow this trend, with the Rooms Revenue showing an increased contribution of 51.7% to the total revenue. On the other hand, contribution from Food & Beverage and Banquets declined to 41.5% from 42.6% recorded in 2014-15. The contribution of the Other operating departments has remained range-bound for the past five years. Exhibit 2 displays the contribution to Total Revenue by the different operating departments. Exhibit 2: Sources of Revenue (2011-12 to 2015-16) ◗ Decrease in Departmental Expenses: Departmental Expenses as a percentage of Total Revenue decreased for the third year in a row, mainly driven by the percentage decrease in Rooms and Other Expenses. However, F&B Expenses increased to an All-India average of 64.1%, a sharp increase from the previous year. Exhibit 3: Departmental Expenses (2011-12 to 2015-16) ◗ Cost Analysis: Except for F&B Expenses, the survey results depict that the expenses, as a percentage of Total Revenue, remained stable or declined in 2015-16. However, on a per available room (PAR) basis Market- ing Costs, Rental & Other Incomes, and Management Fees increased by 23%, 18%, and 14% respectively over those recorded in 2014-15. Fixed expenses, conversely, portray a 18% decline on PAR basis over that in the previous fiscal. ◗ Food & Beverage: As highlighted in Exhibit 2, F&B and Banquets Revenue as a percentage of Total Revenue declined in 2015-16. This corresponded to an increase in F&B Expenses as a percentage of Total Revenue over that registered in 2014-15. On closer inspection, revenue from the food and beverage outlets display a decrease on a PAR basis, whereas revenue from Ban- quets has increased. The F&B Expenses on a per available room basis have increased by 9%. ◗ Guest Analysis: Domestic travellers continue to be the majority generators of room night demand in India. It is important to highlight that the Domestic Business Traveller segment has displayed a year- on- year growth to form 34.4% of the total demand accommodated by Indian hotels, whereas the contribution of Domestic Tour- ists or Leisure Travellers has declined from 21.7% in 2014-15 to 19.8% in 2015-16. Foreign Demand, on the other hand, has remained stable, contributing 20.6% between the Business, Leisure and Tour Groups segments (Table 1-5). seven Major Cities bengaluru Bengaluru has established itself as a thriv- ing service industry led economy, driven primarily by the IT/ITeS sector. Equipped with one of the highest densities of Grade A office space, the city is also home to a healthy mix of research, manufacturing, aeronautical engineering and biotechnolo- gy companies, as well as the largest number of start-ups in India. These industries remain the major demand generators for the third largest Indian branded hotel market. Bengaluru hotels witnessed a surge of 15.3% in marketwide RevPAR in 2015/16, surpassing the other major hotel markets in the country. Driven mainly by robust growth in occupancies, the city's hotels also dis- played a marginal increase in average rates, ending a four-year downward trend. The fact that the resilient market performance was accompanied by a 6% growth in supply Bengaluru hotels witnessed a surge of 15.3% in marketwide RevPAR in 2015/16, surpassing the other major hotel markets in the country. Leisure demand has witnessed marginal improvement in Kolkata, because of initiatives such as the recent introduction of river cruises. ◗ Online Reservations as a Source of Advance Bookings: Another integral trend highlighted by the survey results is the increasing contribution of Online Reser- vations Systems as a source of advance bookings for hotels in India. In 2015-16, 12.4% of the total advance reservations were made via these channels, compared to 8.5% during 2014-15. This trend is expected to gain traction, as more travellers adopt the ease and convenience offered by Online Reservations. ◗ Net Income: As depicted in Exhibit 4, All India average Net Income as a percentage of Total Revenue crossed the 30% mark in 2015-16. Primarily driven by the increase in average rates and, therefore, increase in Rooms Revenue for hotels across all star categories (barring one), the increase in Net Income arrests the downward trend witnessed over the past three years. Exhibit 4: Revenue and Net Income (2011-12 to 2015-16) bodes well for the city that is expected to add approximately 3,500 rooms in a phased manner over the next five years. The city, however, continues to face challenges, mainly due to the paralysing infrastructure and lack of a convention centre built to international standards, in the face of the burgeoning demand from the Commercial and MICE segments. However, HVS remains extremely optimistic about the hotel market's performance, with a steady increase in RevPAR anticipated for the next three to five years. Chennai Chennai, one of the largest hotel markets in South India, enjoys demand from all the major business sectors including manu- facturing, IT/ITeS, port and port-related activities, the government and embassies, the banking and financial sector and a growing MICE demand base owing to the recent expansion of room inventory and large-scale meeting facilities in the city. In 2015, the market continued on its path to recovery even in the face of floods that impacted business towards the end of 2015. The city also witnessed the opening of new hotels, including the InterContinental Resort on ECR, Fortune Select Grand on GST Road, and Turyaa by Heritance on OMR in the last calendar year. All the micro-markets in Chennai recorded a growth in occupancy in 2015-16, while average rates declined marginally. Going forth, with over 1,000 rooms expected to enter the OMR market over the next two years, we expect the hotel market on OMR to remain under pressure in the short term. Overall, with the Meeting and Conference and Commercial demand grow- ing in the city, we expect hotels (especially in Guindy) to consolidate and build on their average room rates having achieved a healthy occupancy. goa Goa continued to demonstrate growth, marking an eventful year with two high profile events – the Defence Exposition and the BRICS Summit in 2016. The Domestic FIT and Meeting and Conference segments showed growth post the decline in charter movements, highlighting a notable change in the nature of demand. A significant development has been the signing of an agreement between the Government of Goa and the GMR Group to develop and operate the long-awaited greenfield airport project at Mopa in North Goa. The first phase is reported to start operations by 2019-20 and is expected to enhance domestic and regional connectiv- ity, thereby giving a boost to the tourism and hospitality sector. Further, the government is also developing an electronic city in Tuem that is expected to generate commercial demand for North Goa hotels. With the growing demand, changing seg- mentation and infrastructure developments, the government as well as private investors are keenly evaluating proposals for large- scale meeting facilities in the city. While Goa continues to face competition from beach destinations in South and Southeast Asia, we believe that the buoyant domestic demand and the anticipated development in regional connectivity will continue to drive the market's growth in the medium to long term. Kolkata Kolkata is driven primarily by commer- cial activity emanating from PSUs, PSBs, manufacturing, IT/ITeS, engineering, medical activity and the telecom industry. Over the course of the last decade, the city has witnessed expansion further east with residential and commercial developments along Rajarhat, EM Bypass and Salt Lake City. Similarly, hotels in Kolkata are on the cusp of change. For the first time in the city, hotels are now divided into two distinct micro-markets – the city hotels (which serve demand emanating from the CBD and south-western industrial corridor) and hotels along the eastern periphery (serving demand originating from Rajarhat, Salt Lake and the EM Bypass). In 2015-16, while room night demand had not witnessed noteworthy change, demand from the Commercial and Extended-Stay segments witnessed organic growth, pro- portionate to that of commercial/industrial activity in Kolkata. Leisure demand has witnessed marginal improvement in this market, because of initiatives such as the recent introduction of river cruises, which attract foreign tourists to the city. The only segment to exhibit healthy growth is the Meeting and Group segment primarily due to social events, weddings and a few city- wide conferences.