ADR grew in 2018, crossing 3k for the first time in mid-scale segment: Horwath

According to a latest report by Horwath HTL, India-wide Occ is stuck in the low 60’s. ADR grew smartly in 2018, crossing 3k for the first time in the mid-scale segment in India. This segment has 34k rooms, with 24% of all-India chain affiliated inventory. About 1,500 rooms were added in 2018. 18k rooms in this segment (54% of segmental supply) are in the key markets. Several occupancy shifts have been in the negative direction. Bengaluru, Goa and Jaipur dropped Occ between 2.7 pts and 4 pts. Bengaluru is particularly surprising because there is no supply growth in this segment. Bengaluru and Goa at least made up on the ADR front; the former added over Rs. 300 to comfortable cross the Rs 3k level. Goa ADR growth was more modest but is now pushing the Rs. 4k level. Jaipur dropped rate as well – only Rs 60 but that’s material when one is in the low Rs 2k level. Delhi, Gurugram, Pune and Chennai moved up to the right, gaining both Occ and ADR. Occupancy gains varied from 0.8 pts to 1.5 pts; while ADR gains spread significantly between 3.3% and 12.6%. In money terms, these varied between a modest Rs. 100 and a healthy Rs. 370. Happily, there is no under-performer on the Occ front
although Jaipur does remain a soft rate performer. Improving product quality at the Midscale level (e.g. the revitalised Ginger and Park Inn by Radisson) could enable improve performance for this segment. It really needs Occ growth in Key markets to compensate softer initial period results from smaller cities and towns in which this segment must penetrate. Domestic brands have a major play in this segment, but must also carry the responsibility of improving value-add. This is the segment under stress from Oyo and similar products and the hotel sector has an interesting fight on its hands.