https://www.crisilresearch.com/Union_Budget/Budget%20Analysis%202013-14.

pdf Hotels Room additions to impact RevPARs During April-December 2012, growth in room demand remained subdued at around 4 per cent for 12 key business and leisure destinations in India, due to an uncertain macroeconomic environment. However, room additions continued to grow at a faster rate of 10 per cent. As a result, occupancy rates (ORs) declined by 200 basis points on a year-on-year (y-o-y) basis to 60 per cent. Intense competition resulted in average room rates ( ARRs) declining by 3 per cent and consequently, revenue per available room (RevPARs) declined by 5 per cent y-o-y during this period. In 2013-14, growth in room supply is expected to outpace the growth in room demand in 12 key cities of India. While room demand is expected to increase by a modest 8 per cent, room supply is likely to rise by 14 per cent. This demandsupply mismatch will lead to a 200-300 basis point decline in occupancy rates (ORs), which could reach decadal lows of 58 per cent in 2013-14. Further, intensifying competiton, arising from supply additions, will cause ARRs to decline by 4-5 per cent y-o-y to Rs 7,000 per day in 2013-14, from Rs 7,400 per day in 2012-13. As a result, RevPARs are expected to dip by 8-9 per cent to Rs 4,050 in 2013-14, from Rs 4,450 in 2012-13. All business destinations are expected to witness a drop in RevPARs. Premium segment hotels in cities like Chennai, Bengaluru and Ahmedabad will witness RevPARs declining by over 15 per cent (y-o-y) in 2013-14. RevPARs in NCR and Kolkata are expected to decline by around 10 per cent. On the other hand, RevPARs in

Mumbai, Pune and Hyderabad will decline at a relatively moderate pace of 2-5 per cent (y-o-y) in 2013-14, as supply additions are expected to be relatively slow. Among leisure destinations, RevPARS in premium hotels in Kochi and Jaipur will decline by around 15 per cent y-oy in 2013-14. RevPARs in Goa and Agra will increase by 5-7 per cent y-o-y on account of limited supply additions. 44 CRISIL BudgetAnalysis Hotels Union Budget 2013-14 - neutral impact on hotel industry Company Impact Impact factors Hotel Leelaventure Ltd Q A EIH Ltd Q A Oriental Hotels Ltd Q A Taj GVK Hotels & Resorts Ltd Q A Indian Hotels Company Ltd Q A Source: CRISIL Research Impact factors A. As of July 2012, only air-conditioned restaurants that served liquor were levied a service tax at 12.36 per cent, with an abatement of 60 per cent (net service tax of 4.95 per cent). In the Union Budget of 2013-14, it has been proposed to include all air-conditioned restaurants, including those which do not serve liquor, under the service tax net. This proposal is not expected to impact demand as the service tax will be passed on to consumers.