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Dr. Mark Sinclair
Dr. Mark Sinclair, Mentor Education

Hotel returns halved

20 August 2013

The latest Property Council / IPD Australia All Property Index has indicated that returns generated from the hotel sector have halved in a year.

For the year to June, total annual returns from the hotel sector fell from 12.8 per cent in 2012 to 6.3 per cent. With nearly 75 big hotels reported as putting up for sale boards and several others closing amid falling check-ins and dwindling room rates, hotels around the country are running half empty, as the GDP growth slipped to 5% levels this fiscal year, says the Federation of Hotel and Restaurant Associations of India (FHRAI).

It seems the hospitality industry is becoming another casualty of the slowing economy, and with most hotels in the country running half empty, the hoteliers’ body has found that average hotel occupancy in 2012-13 dropped to the lowest in a decade at 58.3% and average room rates fell to Rs 6,214, the lowest in six years.

Managing Director for Savills Hotels for Australia and New Zealand Michael Simpson, has commented that the soft returns were disappointing, but highlighted that the sector had outperformed other sectors over the past five years. “Operators were choosing to discount room rates in an effort to keep the occupancy rate high. “Hoteliers drop rates as soon as there is a drop in business conditions,” he said.

Nora Farren Colliers International’s head of research has also commented that the drop had been exacerbated by uncertainty around the election and concerns about a drop in business travellers.