With September, when hotels revise room tariff, being hardly a couple of months away, senior executives of major hotel companies are busy doing their arithmetic.
After three years of almost status quo, hotels chains in India are expected to hike room tariff this year. According to many senior executives in the industry, the tariff revision will be 15-20 per cent this time.
Though most hotels are “doing good” in terms of occupancy levels, thanks to inflationary pressure and rising employee cost, bottom lines of the companies are getting thinner by the day, they say.
In addition to 15-20 per cent increase in expenses such as raw materials, power and fuel, industry biggies such as Indian Hotels Company (that owns the Taj brand of hotels), EIH Ltd (part of the Oberoi group) and Hotel Leela Venture have reported 17 to 30 per cent increase in employee cost during 2010-11.
Following the global financial crisis that started pounding Indian shores in late 2008, hotels have not revised tariffs. Discounts were across the board.
Discount season
Most hotels offered even 50-60 per cent discount on rack rates (published tariff). Only in 2010 some hotel chains revised tariff in the range of 5-12 per cent, depending on the location of the property.
Now, though occupancy levels are almost close to those of 2007, in terms of room rates, “we are still 20-25 per cent lower than in 2007”, says a senior executive of a leading hotel company. According to him, 15-20 per cent revision in tariff is likely this year.
Mr Rajeev Menon, Vice-President of Marriott International Inc and in-charge of operations in India, Australia, Maldives and Malaysia, says though hotels have been seeing a two-digit revenue per available room (RePAR) growth across the country, the growth is predominantly driven by occupancy and not by rates. Beginning this year, the RePAR will get better “as rates too will firm up, as has not been the case in the last three years”.
He says most hotels have been enjoying 65-70 per cent occupancy for more than a year now, and the demand is growing. “So from my perspective, if the demand continues to grow the way it is rates will certainly firm up. Otherwise, we may have to struggle, given the inflationary pressure and growing wage costs.”
Mr Virendar Razdan, General Manager, Sheraton Park, Chennai, has the same view. He says in addition to tariff revision, some hotels may even do away with bundling offers such as complimentary breakfast and airport pick-ups and drops.
According to some hoteliers, room rates may even go back to 2007-08 levels.
Mr Ajay K. Bakaya, Executive Director of Sarovar Hotels group, however, differs. He says that while tariffs would almost certainly rise, “2007-levels are not realistic.”