HOW TO CREATE HOTELS THAT ARE PROFITABLE

As a hotel consultant, I am often asked a pertinent question: Do hotels profit in India?

The challenges in building, operating, buying and selling hotels are a plenty. Investors frequently point to the relatively lower risk associated with other commercial asset classes such as office buildings, retail developments and warehouses. The highly dynamic and perishable nature of the hotel business pushes them to question the very veracity of it.

So, are hotels a good investment? Do hotels make profits in India? At the risk of doing what consultants do so well, I must state that my answer is — it really depends.

A myriad of factors impacts the profit-generating ability of hotels, not the least of which is the market’s inherent potential.Both inbound and domestic movements across India have been displaying congruous growth. The demographic denominations thus point to a promising base of demand that shall continue to extend. While some other sectors have witnessed a dampening of sentiment in the recent months, the corporate tax rate slash and the GST reduction on guest room folios has the potential to shore up the hotel business.

Moreover, economic appreciation is being witnessed across scores of rapidly developing towns and cities. Travel, trade and the resultant tourism are likely to be the natural benefactors of such an environment. It may appear reasonable to infer from such circumstances that a year-on-year growth of revenue (and by some ill-fated logic, profits)across most hotels in India is infallible. You see, this is where it becomes important to make a distinction between what is practical and what is practicable.

Higher room demand may not always translate to profits