Hotels - Time to check in

The Hotel industry in India was on a dream run during CY2004-08, with demand for rooms outstripping supply. Factors like high economic growth, rising income levels, government’s ‘Incredible India’ campaign, low cost airlines, etc., all contributed in increased movement of both domestic and foreign tourists within the country. Aiming to grab a share of the growing hospitality industry, many players, both domestic and international, announced aggressive plans to set up hotel properties across key destinations in India. This led to fears of over-supply in rooms, which would have put pressure on Occupancy Rates (ORs) and Average Room Rates (ARRs) of the hotel players thereby adversely hampering their profitability. However, sentiments reversed by the end of CY2008 due to dire global economic conditions, leading to lower tourist activity both for leisure and business purposes. Moreover, tighter liquidity conditions led to many players cancelling/delaying their earlier announced roll-out plans. However, with India emerging as a frontrunner in recovering from the global turmoil, signs of improving demand are visible again, with tourist movement picking up thereby resulting in ORs improving, which would consequently be followed by ARRs in the coming quarters. This coupled with lower supply of rooms than earlier estimated would enable hotel players to regain lost ground.


By Mr. Viraj Nadkarni, Research Analyst, Angel Broking

Union Budget 2010-11 – No brake in momentum

Finance Minister, Mr. Pranab Mukherjee, managed to do the unexpected in the Budget. In what was largely being feared as an exercise that could have put some friction to the recovery that the Indian economy is currently witnessing, it actually turned out that the Finance Minister has managed to effectively conclude this exercise in a highly balanced fashion. This has left a lingering 'feel-good factor' in the minds of most segments of the society; be it corporates, individuals, economists, etc.

The markets have already given thumbs up to the Budget. What has aided market sentiments is the fact that the expectations had been quite low in the weeks prior to the Budget. Also, the apprehensions with respect to the extent of the stimulus withdrawal possible in the Budget had kept market participants shying away from investing. However, not only was the stimulus much gradual than anticipated, the FM has managed to please a large section of the economy without compromising on fiscal responsibilities, which was accepted well by the market. Thus, at the current juncture, one can safely conclude that there seems to be no brake on the momentum being witnessed in the economy as the FM has been calculative enough to initiate a move towards fiscal prudence without jeopardizing the country's growth prospects.

By, Hitesh Agrawal, Head – Research, Angel Broking

Markets @ 9 – The brighter side

Recently, the Indian Stock Exchanges implemented an Extra Trading Hour for investors, which has largely been opposed on several grounds. However, if we consider the brighter side of this development, it could work in favour of the Indian economy. This is because, apart from the fact that the Indian stock markets will now relatively be in a better position to react to global information flow, i.e. closer in tandem to Asian markets which open earlier because of the time zone differential; extended hours could also lead to higher participation interest by FIIs resulting in higher capital inflows. This would be a positive for the Indian economy, which is a capital-starved nation with the potential to grow at 10% per annum. Thus, additional long-term capital inflows will only work in favour of one-and-all Indians.

By Hitesh Agrawal, Head-Research, Angel Broking