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 Parameters Income from Operation Total Income Employee Cost Fuel, Power and Light Total Expenditure Interest Net Profit Per cent Change -4.63 -4.47 7.47 11.28 19.84 51.65 -64.80

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

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

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