GST rate cut stimulates hotel sector revenue in Q3 2019

Source: hospitalitybizindia.com

In its 37^th Meeting, the Goods and Services Tax (GST) Council had announced a reduction in GST rates for hotel room tariffs. This has started showing positive results in the hospitality sector, with nine out of the top 11 markets seeing better performance in terms of revenue per available rooms (RevPAR) and average daily rates (ADR).

According to the JLL’s report titled Third Quarter Hotel Momentum India (HMI), nine out of the top 11 cities witnessed a rise in RevPAR performance during the July-September 2019 period. Bengaluru was leading in the RevPAR growth with a 12.4% year-to-date rise and 11% growth in the third quarter over the same period last year. Gurugram witnessed 11.9% year-to-date and 9.5% growth in the third quarter. Likewise, Hyderabad, too, saw 11.1% and 6.9% growth, respectively.

Calculation of RevPAR and ADR

RevPAR is calculated by dividing a hotel’s total guestroom revenue by the room count and the number of days in a period. On the other hand, ADR is computed by dividing the average revenue earned from rooms by the number of rooms sold.

For eight out of the top 11 cities, an increase in ADRs was also witnessed in the third quarter of the year 2019. Bengaluru saw a 7.9% growth in ADR in Q3, Hyderabad 6.9%, and Gurugram witnessed 5.6% over the same period last year. Gurugram was leading in the occupancy growth for Q3 2019 with 2.4%.

Jaideep Dang, the Managing Director of Hotels and Hospitality Group, India, JLL said, “First nine months of the year (January-September 2019) have been exciting for the entire industry.” He further added, “The industry is hopeful that a similar momentum will be maintained in 2020 as well.”

In the third quarter, the country saw a total of 36 hotel signings, comprising 2,867 keys in comparison to 35 hotels comprising of 3,422 keys in the same quarter last year. The maximum number of signings was contributed by the upscale and midscale hotel brands.