Slowdown, competition bring down hotel room rents by 25 percent

March 20th, 2009 - 12:47 pm ICT by IANS  

By Venkatachari Jagannathan
Chennai, March 20 (IANS) A steep fall in occupancy ratio in the wake of the global slowdown and tight competition among hotel operators in a shrinking market have brought down hotel room rents drastically across the country, say industry officials.

“The average occupancy ratio across the country is around 50 percent, which has brought down the room rent by 25 percent. The hotels may revise their printed rates this September-October,” M.P. Purushothaman, president of the Federation of Indian Hotels and Restaurants Association of India (FHRAI), told IANS.

According to him, conferring infrastructure status to the hotel industry, imposition of uniform tax rates and offering land on lease for building new hotels would accelerate the competition, bringing down room tariffs further.

“With more hotels coming up, which would add around 40,000 rooms over the next two years, the rates will further go down or stagnate,” hotel chain Empee Hilton’s chief executive Suresh Madhok told IANS.

In south India alone over 9,300 rooms will be added by 2011-end.

Empee Group is building a five-star hotel in Chennai. “Our 253-room hotel (in Chennai) will be ready by this September or October,” Madhok added.

Hoteliers said corporate travellers were the major source of income for Indian hotels.

“Unlike hotels in other Asian countries that depend on leisure travellers, the Indian hotels have a mixed clientele with corporate travellers forming a sizeable percentage,” Geoff Magee, chief executive of city-based five-star hotel Accord Metropolitan, told IANS.

He added that the Indian hotel industry was still positive of the future plans as “the mood is not down and out here”.

Magee further shrugged off the complaints from European travellers that room rates were high in India. “Their complaint is to get lower rate for the next tourist season. Unlike in Europe or in the US, the mood is positive here though the growth rates have slowed down.”

Added Deepak Manocha, general manager of Pune-based Courtyard by Marriott: “It’s a myth that the high room rent here is the reason that stops Europeans from coming to India.”

“The recession in Europe has resulted in low occupancies and as a result, the average room rate has taken a beating of almost 30 percent in all major leisure markets. Rooms are now sold not only for less but also bundled with packages, like breakfast, airport transfers or a day’s sightseeing,” he said.

According to Manocha, though the slowdown has led to fall in hotel occupancy by corporate leaders, the leisure travel segment is still looking healthy.

The officials said the fall of rates would affect the business as operational costs had gone up during the boom time.

The poor power situation in the country has forced many hotels to use gensets which in turn increased the costs.

With more flights between cities and lower fares, corporate travellers prefer to return to their bases after assignments instead of spending nights at hotels, officials said.

According to an industry official, till the Beijing Olympic Games, the Indian hotel industry was comparable with that of China.

“Post-Olympics, there is surplus room capacity in China and it cannot be compared with India,” he said, noting that this would tighten competition at the international market.

(Venkatachari Jagannathan can be contacted at v.jagannathan@ians.in)

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