Hotels focus on value play to beat slowdown

Hotel room rates have dropped by 25% this month following an equally sharp fall of 35% in occupancies across all the premium business hotels. To salvage business volumes, premium hotels like Hyatt, Leela, Marriott, ITC, Four Seasons, the Lalit (previously InterContinental- the Grand) are sharpening focus on segments unaffected by the tough business environment.

Traditionally, hotels compensate low-business volumes in December by leisure travel. However, the economic slowdown and the terrorist attack in Mumbai have played havoc to both business and leisure travel this year.

“We have begun focusing on ‘guaranteed’ business segments like cabin crew, extended long-stay programmes and companies in the FMCG and oil rig space to tide over the ongoing economic slowdown,” said Anurag Bhatnagar, GM of Le Royal Meridien. Hotels have started introducing special packages and value rates for rooms for the coming holiday season to boost business volumes. Hotels expect the business travel to pick up from the first week of January, sources said.

Most premium hotels raised room rates in October this year by 15-20% as October-January is usually a peak season for the sector. However, these hotels are unable to do business at the contracted room rates owing to the global economic slowdown.

Customers, who earlier contracted rates for a particular room, are downgrading within the premium business hotel category, the sources said. However, resort destinations like Goa, Kerala are faring better as compared to premium business hotels,” said Vivek Nair, VC and MD of Mumbai-based Hotel Leela Venture.

Hospitality sector is now seeking a relief package in the wake of the slowdown and massive room cancellations. Also, the industry is currently threatened with a large number of non-performing assets (NPA), as many hotels paid high prices for real estate to meet the shortage of 1.5 lakh rooms for the 2010 Commonwealth Games.

Hotels also seek a 5% reduction in luxury tax rate to give a fillip to business, the sources said. Currently, the luxury tax is being charged by various states ranging from 5% to 15%.

Also in some states, luxury tax is charged on the services provided by the hotels like spa treatment, meeting room rentals. Hotels have to follow the practice of charging luxury tax only on the room charges, the sources said.