While this was better than Dec’08 (immediately post the 26/11 attacks), data is disappointing. Jan is traditionally considered peak business season for star hotels and average occupancy falling to 58% (vs. 79% in Jan’08) with ARRs down 14% YoY in 10 key cities across India does raise downside risks to earnings. Bangalore and Pune reported the least occupancy for the month at 49% and 43%
respectively, with Mumbai at 54%.
With business and tourist traffic down following the global economic downturn and risks of likely supply kicking in (though with delays), we expect occupancies to remain muted over the next 1- 2 years. Declining ARR in Jan-09 could be early signs of intensifying competition. With more international hotels looking to enter India and existing players having ongoing expansion plans across most markets, we see pressure building on ARRs.