Calcutta, Aug. 25: The rupee volatility has raised the operational cost of hoteliers, but they also stand to benefit from a surge in both foreign and domestic tourists.
According to industry observers, the devaluation of the rupee, which slumped to over Rs 65 against the dollar on August 22 and marginally recovered to about Rs 63 thereafter, has presented both opportunities and challenges.
Hoteliers are feeling the pinch of higher import costs of inputs, which range from beverages to furnishing and electrical components, while the weak currency is a fillip for inbound tourists as their expenses have decreased.
“Import costs have gone up, increasing the expenses and putting pressure on the operating margins,” said Kamlesh Barot, former president and member of the Federation of Hotels and Restaurant Associations of India’s.
“The rupee depreciation will impact the balance sheet of hotel companies overleveraged in foreign currency denominated loans,” said Vijay Dewan, managing director of The Park Hotels.
Major hospitality chains such as Indian Hotels, EIH and Hotel Leelaventure have registered a growth in their total expenses in the first quarter ended June 30.
With the dollar becoming dearer, there could also be a rise in domestic tourists as foreign travel costs will rise.
The industry anticipates the benefits of the rupee depreciation to accrue in the second half of 2013-14, when the inflow of inbound tourists picks up. “Inbound tourism begins in September and lasts till March,” said Karan Anand, head — relationships, Cox & Kings Ltd.
The inflow of foreign tourists in the lean season (January-July 2013) has already seen a 3.3 per cent jump over the same period a year ago, and the industry expects it to grow further mostly driven by the weak rupee.
“If the volatility persists, it will be advantageous for inbound travellers as the room rates will be cheaper. There could be a growth of about 10 per cent in the foreign tourist arrivals during the October-November period,” said Ajay Bakaya, executive director of Sarovar Hotels and Resorts. He said a large part of the demand for rooms could emerge from business travel.
“The devaluation should improve demand and positively impact foreign tourist arrivals as India becomes an affordable destination. Domestic tourism should also rise as international travel becomes more expensive. If the government can prevent a rating downgrade, it should lead to better hospitality results in the second half of fiscal 2013 and thereon,” said Dewan.