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Hospitality sector faces waning demand

Hospitality sector faces waning demand
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First Published: Mon, Oct 17 2011. 01 15 AM IST

Bloomberg
Bloomberg
Updated: Mon, Oct 17 2011. 04 28 PM IST
New Delhi: Hotel and tour operators in India are facing a slump in demand as holidayers from Europe and the US delay travel plans because of deteriorating economies, belying expectation that the first Formula 1 race in the nation and the holiday season around Christmas will boost foreign tourist arrivals .
Tour operators expect demand from leisure travellers to drop as much as 10% from a year earlier, affecting occupancy rates at India’s luxury hotels as overseas tourists choose to delay travel plans or holiday closer home to save money.
Bloomberg
The drop in demand comes at a time when luxury hotel operators were planning to raise tariffs in anticipation of demand from travellers for events including the Formula 1 race to be held later this month in Greater Noida, near the Capital, and as the holiday season for European and US travellers starts in December. Overseas leisure travellers account for as much as 40% of total foreign tourist arrivals, according to industry experts.
“There has definitely been a slump in demand from Europe for the leisure segment, which is a reflection of the economic condition there,” said Dipak Deva, chief executive for India and South Asia, Kuoni Destination Management. “We anticipate demand to go down by 10% this season.”
Traditional markets for foreign tourists to India, including Spain, Italy, France and the UK, have generated less enquiries, but it is not as bad as 2008-09, Deva said. Tourist arrivals and business travel to India had dropped in 2009 because of the global economic recession following the financial crisis.
Half of all foreign leisure travellers to the nation come from western Europe and the US, according to Deloitte. The UK and the US are followed by France and Italy as the top source markets, according to tour operators and industry experts.
“There has been a decline in our business for leisure segment as people are delaying their plans of coming to India,” said Vickey Shashoo, product manager at Travel Inn, a tour operator.
Hospitality companies have been bullish about foreign tourist arrivals in India, after the number of such travellers dropped following the global financial crisis. There were 4.2 million foreign tourists arrivals in the first nine months of the current year, a growth of 10% from a year earlier.
Demand has declined in the leisure segment, but business travel is still holding up in the world’s second fastest growing major economy after China, despite the debt crisis in Europe and the prospect of a double-dip recession in the US.
“As far as industry goes, there has been a 7-12% reduction in enquiries being converted into actual travellers for leisure segment,” said Deepak Tuli, head for travel website Goibibo.com. “Occupancies in hotels also have not been up to the level expected earlier this season.”
Manoj Gursahani, chief executive of Travelmartindia.com, a vacation-planning company, said the group has seen a 10% reduction in demand from countries such as Germany, France and Italy since August.
Hospitality industry analysts are less optimistic about the prospects of the industry as the economic crisis cuts income, leaving less money for travel.
“The demand may have slumped for leisure travellers due to economic and political reasons,” said P.R. Srinivas, India head for hospitality at Deloitte. “People in a few European countries have now pretty less discretionary income that is available for travelling, so instead of long-haul holidays, they are going for short-haul destinations.”
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First Published: Mon, Oct 17 2011. 01 15 AM IST
More Topics: Hospitality | Demand | Travel | Tourism | Hotels |