ASSOCHAM

FINANCIAL

PULSE

STUDY

Performance of Hospitality Industry

May 2009

Prepared by

Birender Kumar

Assocham Research Bureau

EXECUTIVE SUMMARY

The average net profit of 10 hotels has declined by 65 per cent in Q4 FY

’09 as compared to the Q3 FY ’09.

Out of these 10 hotels, in Q4 FY ’09, 8 hotels have registered decline in

net profit on sequential basis.

The interest cost of 10 hotels went up by 51.65 per cent in the fourth quarter

of FY ’09.

Te fall in total income was about 4.47 per cent as compared to the third quarter

of FY ’09.

The total expenditure in fourth quarter of FY ’09 rose by 7.47 as compared to

the third quarter of FY ’09.

INTRODUCTION

TIME PERIOD

The Report prepared by ASSOCHAM Research Bureau has taken corporate results

announced by the hospitality companies during the financial year ended March

2009. Hotels that have announced their results during 1st April- 25th May 2008-09

have been taken for analysis.

DATA SOURCE

The Report is prepared based on the data posted by Hotels listed on the Bombay

Stock Exchange.

SAMPLE SIZE

The ASSOCHAM Research Bureau (ARB) has taken 10 hotels for purpose of the

performance analysis of the sector.

PARAMETERS

The analysis of the hotels is based on the following set of parameters:-

Income Analysis

Income from operation

Net profit

Cost Analysis

Total expenditure

Interest Cost

Employee cost

Fuel, power & light cost.

METHODOLOGY

To analyse the Indian hospitality sector, simple average of the above mentioned parameters has been taken.

Recession hit hospitality sector sees 64 per cent drop in profits post terror

attacks: Assocham

Post Mumbai terrorist attack combined with the global slowdown, have severely

impacted the bottom line to the extent of 64 per cent of the Indian hospitality

sector, as per the analysis carried out by the Associated Chamber of Commerce

and Industry of India (ASSOCHAM).

While the inflow of foreign tourist came down sharply and the rates shrieked, there

has been a rise in expenses as based on profitability and cost parameters of the

hotels on the quarterly results posted by hotel companies listed on the Bombay

Stock Exchange (BSE) from 1st April-25th May 2009.

The total income of such hotels, which included income from operation and other

income also, registered average decline by 4.47 per cent in Q4 FY ’09 as

compared to the Q3 FY ‘09. The income from operation also showed the average

decline by 4.63 per cent during Q4 FY ’09.

Hotel companies such as TAJGVK Hotels & Resorts Limited has registered decline

in net profit by 41.49 per cent in Q4 FY ’09 as compared to the Q3 FY ’09 followed

the Jaypee Hotels Limited which registered decline in net profit by 44.86 per cent

during the same period. The other hotels which registered major decline in net

profit were Oriental Hotels Limited (28.34 per cent), Jindal Hotel Limited (58.12 per

cent) and Howard Hotels Limited (57.28 per cent).

Performance Analysis of Hotel Industry

Source: Corporate Announcements for the year ending 2008-09.

Despite the decline in income top line and bottom line, the cost of hotel industry went up by 20 per cent during Q4 FY ’09 as compared to the Q3 FY ’09. The maximum rise was incurred by Asian Hotels Limited (11.57 per cent) followed by Jaypee Hotels Limited (10.85 per cent) and TAJGVK Hotels & Resorts Limited (8.30 per cent).

The rapid pace of expansion in hospitality sector of India raised the interest cost borne by the Indian hotel industry. The borrowing cost of the hotels went up by 51.65 per cent in fourth quarter of FY ’09, while the total income decreased by 4.47 per cent during the period. The ten hotels analysed by the AFP registered rise in interest cost, the maximum increase was incurred by TAJGVK Hotels & Resorts Limited (193.51 per cent) followed by Howard Hotels Limited (164.94 per cent) and Oriental Hotels Limited (89.10 per cent) among others. The employee cost of hotels also registered a rise in the total expenditure during the period. The employee cost of hotels rose by average 7.47 per cent in Q4 FY ’09 as compared to the Q3 FY ’09. The hotels that witness maximum rise in employee cost include Asian Hotels Limited (24.91 per cent), TAJGVK Hotels & Resorts Limited (24 per cent), Howard Hotels Limited (21.65 per cent), Ishwar Bhuvan Hotels Limited (15.45 per cent) and Oriental Hotels Limited (13.27 per cent) among others in Q4 FY ’09 as against Q3 FY ’09.

The cost of power, fuel & light increased by 11.28 per cent in Q4 FY’09 as compared to

the Q3 FY ‘09. Among the hotels, Jindal Hotels Limited incurred maximum expenditure

on the cost of power, fuel & light by 147.81 per cent, along with TAJGVK Hotels &

Resorts Limited (20.34 per cent), Asian Hotels Limited (17.79 per cent) and

Parameters Per cent Change

Income from Operation -4.63 Total Income -4.47 Employee Cost 7.47 Fuel, Power and Light 11.28 Total Expenditure 19.84 Interest 51.65

Net Profit -64.80

Howard Hotels Limited (15.75 per cent).

Asian Hotels Limited is the only hotel which registered rise in income from operation and net profit among others. The company registered 50.10 per cent rise in net profit and 18.73 per cent rise in income from operation. The company also registered increase in total expenditure by 11.57 per cent and employee cost by 24.91 per cent during the period.

Jaypee Hotels Limited witnesses a 44.86 per cent decline in net profit during the period, however, total income decline by 6.92 per cent. The interest cost of the company increased by 31.02 per cent during the period. The employee cost and total expenditure of the company increased by 1.63 per cent and 10.85 per cent during the period.

The other company which registered decline in net profit and total income was Oriental Hotels Limited. The company registered a 28.34 per cent decline in net profit and 7.68 per cent decline in total income during the period. The interest cost of the company increased by 89.10 per cent during the period. The company also registered increase in total expenditure by 0.40 per cent and employee cost by 13.27 per cent during the period.

ANNEXURE

The 10 hotels that have been analyzed for the study:

Name of the hotels

Oriental Hotels Limited

Jaypee Hotels Limited

Asian Hotels Limited

Advani Hotels & Resorts (India) Limited

Viceroy Hotels Limited

TAJGVK Hotels & Resorts Limited

Ishwar Bhuvan Hotels Limited

Howard Hotels Limited

Jindal Hotels Limited

Gandhinagar Hotels Limited