Premium Hotel Rates Plummet Amidst Economic Downturn
Hotel room rates have experienced a significant 25% decrease this month, following a similarly substantial 35% drop in occupancies across all premium business hotels. In an attempt to recover business volumes, high-end establishments such as Hyatt, Leela, Marriott, ITC, Four Seasons, and the Lalit (formerly InterContinental- the Grand) are increasingly concentrating on market segments that remain resilient amidst the challenging business climate.
Traditionally, hotels offset reduced business volumes in December with increased leisure travel. However, this year, the economic slowdown combined with the terrorist attack in Mumbai has significantly disrupted both categories of travel and caused a great deal of grief among the populace of India.
"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. To further stimulate business, hotels have initiated the introduction of special packages and discounted room rates for the upcoming holiday season. Sources indicate that hotels anticipate a resurgence in business travel commencing in the first week of January.
Hotels Grapple with Reduced Rates and Downgrades
Most premium hotels implemented room rate increases of 15-20% in October this year, capitalizing on the typically high demand during the October-January period. Unfortunately, the prevailing global economic slowdown has rendered it challenging for these hotels to conduct business at these pre-agreed rates.
Sources reveal that customers who previously secured rates for individual rooms are now opting to downgrade within the premium business hotel category. Vivek Nair, VC and MD of Mumbai-based Hotel Leela Venture noted that resort destinations such as Goa and Kerala are performing comparatively better than premium business hotels.
Hospitality Sector Seeks Relief and Tax Adjustments
The hospitality sector is now appealing for a relief package to address the effects of the economic slowdown and the substantial number of room cancellations. Furthermore, the industry faces a considerable threat of non-performing assets (NPAs), as numerous hotels incurred high real estate expenses in order to address the room shortage of 1.5 lakh rooms anticipated for the 2010 Commonwealth Games.
Sources also indicated that hotels are advocating for a 5% reduction in the luxury tax rate to invigorate business. Currently, luxury tax rates, which are levied by various states, vary between 5% and 15%. In certain states, the luxury tax is also applied to hotel services beyond room charges, such as spa treatments and meeting room rentals; hotels are pushing for the luxury tax to be exclusively applied to room charges alone.