EIH Ltd, has reported an improvement in its overall occupancy rate for April'2000 at 64.7% as compared to 62.8% in April'99. EIH's occupancy rate has been stagnant for the last two years and its average room rate (ARR) has been consistently falling. Another interesting point is that the ARR in April'2000 at Rs 5,856 has fallen by only 2% YoY as compared to a fall of 9% YoY in FY2000.
EIH Ltd, India's second largest hotel chain operates 14 hotels under the "Oberoi" and "Trident" brands. Of this the company owns 10 hotels (1,690 rooms) and manages the other four (636 rooms). Its Mumbai and Delhi hotels contribute to around 80% of the profits of the company. The company reported a net turnover of Rs 4,405 m in FY99.
As EIH is mainly a five star hotel chain it has been reeling under the pressure of falling occupancy rates and declining ARRs like other five star city hotels since FY97. However for the first time in many months the company has actually reported an increase in its occupancy levels in April'2000.
As the economy has started to pick up and the political climate is more stable now, occupancy rates overall for the hotel industry are expected to improve in the next one year. In the case of EIH it is important to see if this improved trend continues over the next couple of months at a consistent rate. Considering the overall economic and investment scenario it is likely that occupancy rates of EIH should improve.
On valuations, EIH Ltd is trading at 6.4x (on FY99 earnings). This is low as compared to multiples of 20x-25x it had traded at few years ago and the negative news which affected the hotel industry seems to be in the price.
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