Mumbai: Hotel chains EIH Ltd and Hotel Leelaventure Ltd are likely to see a sharp drop in net profit in the April-June quarter as margins contract due to falling occupancy levels, analysts said.
EIH’s net profit is expected to fall nearly 73% to Rs104.5 million on a 26% dip in net sales to Rs1.75 billion, a Reuters poll of brokerages showed.
Hotel Leelaventure could see profit plunge 96% to Rs13.5 million on net sales of Rs922.5 million, analysts said.
Analysts said muted demand coupled with a higher base last year points to a depressed quarter for hotels.
“The demand is very low. And the June quarter of 2008 was not a bad quarter. In fact even for an off-season quarter it was a good one. Basically at that point a lot of travel was still on,” said Himani Singh, analyst at Centrum Broking, adding the hotel industry was hit post-October.
Terror attacks on south Mumbai’s Trident-Oberoi and the Taj Mahal Hotel last November accelerated a fall in occupancy levels of hotels, which had already come under the impact of a global slowdown.
“Hotel industry continues to witness lacklustre demand with no immediate revival in sight. We expect a steep decline in the room rates and occupancy rates across cities, especially in Mumbai and Bangalore, to significantly impact Hotel Leela’s profitability,” brokerage B&K Research said in a note.
With a large dependance on South Mumbai, EIH will also witness a fall in profits, it added.
Hotel Leela slashed room rentals in Mumbai and Bangalore by Rs3,000 to 4,000, but has said it is yet to see a revival in occupancies.
A “curtailment in corporate spending, security concerns and lack of discretionary spending by consumers make it a dull quarter,” Centrum’s Singh said, referring to the April-June quarter.
A drop in occupancies by 10% this quarter compared with last year will lead to compression in margins, hurting profitability, Singh added.
Occupancy levels across metros last year stood in the range of 70 to 72% while this year it was down in the range of 60% to 62%.
EIH will report results on 27 July and Hotel Leela on 31 July.