Hotel sector sees good season, will witness better quarter
Public quoted hotels of some major conglomerates witnessed low profits in the past quarter but this quarter (Jan-March 2016) will show a rise in their bottomlines owing to a ‘good season’ this December, industry analysts say. Top gainers at the Colombo Stock Exchange (CSE) were hotels during some days last month, stockbrokers say. However they point out that most trades just add lots under 100 shares at most. “This may tantamount to ‘some’ price pushing, but it is also the anticipation (that hotels will do well this quarter),” a stockbroker added.
The increased supply of graded hotel rooms has led to severe price competition and margin erosion, has had a bad impact on the industry, analysts point out. According to them, gaming centered mix development projects would have raised the inbound numbers and more importantly, their spending profile. The number of smaller to midsized hotels is increasing around the country, which will lead to a mini price war whereby the existing operators will be forced to lower their room rates at the cost of occupancies in order to maintain yields, the stockbroker added, but said that since December has seen high occupancies in most hotels, the sector will do well. The government expects to attract 2.5 million tourists by next year. “With increasing tourist arrivals Year on Year (YOY) we expect positive trends to continue,” an analyst said.