Room rates slashed, yet a bad season for luxury hotels

Average Room Rates (ARR) at 5-star hotels may have dropped, but it has not helped the luxury segment bounce back as the slowdown in travel continues to hurt the category, compared with the budget or resort segment in the hospitality industry.

Despite the onset of the high season after October, the category is unlikely to witness any recovery, say hoteliers.

“Room rates at 5-star hotels have been decreasing by 30 to 50 per cent this year. As the season commences, properties are looking at raising rates, but it can never match their peak season rates. The 5-star segment has been affected as there are less people willing to pay fancy rates during a slowdown,” observes Anil Madhok, Managing Director, Sarovar Hotels.

Foreign tourists The luxury segment comprises mostly travellers from North America and Europe. “The luxury segment has been affected due to the fact that the vast majority of guests in this segment come from North America and Europe, where recession has had the maximum impact. Within the hotel industry, the luxury segment has been hit hard during recession. While operators have been able to experience some level of recovery, the luxury landscape as it once stood no longer exists,” said Nikhil Ganju, Country Manager India, Trip Advisor.

Data collected by TripAdvisor, a hotel, travel and holiday review site, indicates that while traffic from the rest of the world grew 107 per cent, traffic from Europe and North America grew 12 per cent and 60 per cent, respectively.

In terms of the share of travellers looking at luxury hotels versus non-luxury ones in India, that number dipped 4 per cent for Europe and 12 per cent for North America.

To attract more guests, room rates at 5-star hotels in places such as South Mumbai have been slashed from Rs 15,000 to Rs 6,000 this year.

“Hotels in Nariman Point in South Mumbai are not getting adequate occupancies compared to the 5-star hotels in the suburbs. Even hotels such as Trident at Nariman Point, which dropped prices to Rs 6,000, are now trying to climb back with rates at Rs 8,000, which is still nowhere near their peak season rates at Rs 15,000,” adds Madhok.

Increase in supply of 5-star properties is also adding to the problem.

“The 5-star property rates have dropped since the Average Room Rate for a 5-star hotel was about Rs 13,000/night. In 2013, it came down to Rs 11,000/night. The dip in room rates is because of increasing competition. We have noticed a significant increase in the number of hotels opening up in major cities and hence the price corrections by hotels,” said Vikram Malhi, General Manager, South and South-East Asia, Expedia.

purvita@thehindu.co.in