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Domestic business travellers continue to be mainstay - Views on News from Equitymaster
 
 
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  • May 20, 2000

    Domestic business travellers continue to be mainstay

    As per a study conducted by the Federation of Indian Hotels and Restaurants Association of India (FHRAI) for 1998-99, domestic business travellers accounted for 38% of the total guests staying at a hotel on all India basis. The domestic leisure guests came in second at 19% of total guests.

    However the same does not hold for the metro cities and leisure destinations in India. For the metro cities like Mumbai and Delhi foreign business travellers continued to dominate the market as these are prime business destinations in India and also act as a gateway to other destinations. Of the five star deluxe market foreign business travellers accounted for 21% of the market, this percentage being higher for the metro cities.

    On the leisure destination front, Goa enjoyed 59% of foreign leisure guests while in Jaipur the figure was higher at 66%. As the domestic leisure market is still in the nascent stage, foreign guests continue to dominate the leisure market in India.

    In the mid 90's when the hotel industry was doing well the foreign business travellers accounted to over 50% of total guests in the five star hotels. However due to slowdown in the economy and political instability over the last three years this figure stood reduced.

    On the brighter side with tourist arrivals picking up, higher expected foreign direct investment and an improved economic scenario, these augur well for the hotel industry in the coming year. The major beneficiaries of any pick in foreign business travel will be the metro dominated hotel chains like Indian Hotels Co. Ltd, EIH Ltd, Asian Hotels, ITC Hotels and Hotel Leelaventure.

    On valuation terms, Indian Hotels Company Ltd is trading at a price to earnings multiple of 8.0x and EIH Ltd is trading at 6.4x (both on FY99 earnings). This is low as compared to multiples of 20x-25x they traded at few years ago and negativity's facing the hotel industry all seem to be in the price.

     

     

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