Battling hydra of occupancy

Battling hydra of occupancy

HOSPITALITY: Struggling to stay afloat

The economic meltdown, coupled with 26/11 terror attack, saw nearly 50 per cent fall in tourism. The sector is anticipating further 30-35 per cent drop in demand in the current fiscal. Industry experts feel that there is 40-45 per cent fall in occupancy of hotels that resulted in 30-40 per cent loss. Without sops or exemption or reductions in high taxes, it will be tough to tide over the crisis, they say.

The latest Indian Hotel Market Outlook Report — India Digest 2008 — brought out by Jones Lang LaSalle Hotels, says the outlook for tourism is upbeat and key factors driving tourism boom include India’s sustained economic growth, strong foreign direct investment inflows, increased air networks, availability of cheaper air travel, a strong domestic market and aggressive marketing campaigns.
The report concedes that “challenges relating to inadequate tourism infrastructure still remain, but are not enough to dampen the ‘bullish’ outlook for the Indian hotel market.”  In addition, it says, increased frequency of existing routes and the introduction of additional routes by low cost carriers (LCC) such as Indigo, Spice Air, Jet Lite and Go Air will enhance domestic travel flows.

Plethora of taxes

Yet the industry is bogged down by plethora of taxes — value added tax ranging from 12 per cent plus, luxury tax from 10 to 15 per cent, electricity duty from 6 per cent to 25 per cent, besides local levies like room rent tax, octroi, sales tax, that weigh heavily on sector’s profitability. The Centre has to look at the industry in a holistic manner and extend a helping hand opines Hotel & Restaurant Association (Western India) President S P Jain.
Stating the next 18 to 24 months are testing times, Federation of Hotels & Restaurants Association of India President M P Purushothama said organisations wanting to protect their business must take hard decisions and ensure input costs are maintained at levels that would continue to give them profit margins without sacrificing quality of delivery/products.

Safety & security

Noting that it was esssential that demand for services of hotel and restaurant sector is revived by removing fear and concern about safety and security in the minds of tourists, Hotel & Restaurant Association (Western India) Honorary Secretary Kamlesh Barot said government must also extend fiscal reliefs. The hospitality sector has had to tweak input costs to such levels which would give them profit margins but without sacrificing quality of delivery or products with slew of freebies. From on-the-house breakfast to complimentary spa treatments to buy-one-get-one-free packages, free credits and upgrades, hotels are rolling out the proverbial red-carpet for tourists.   If it’s not lower prices — in some cases — it’s value-additions by way of extra nights, free entrace to places of tourist interest, meal and entertainment vouchers, and even cash-back on bookings.
Furthermore, many are also quietly offering rooms at rates several notches lower than regular tariffs. The Centre has also issued directives to hotels to cut tariffs by about 15 per cent to boost sagging tourism. Without government’s diktat too, hoteliers would have not ventured revising tariff upwards. As rooms go a-begging, hotels were slashing rates anyway — in some cases, by as much as 40 per cent. Others — instead of whittling down rates — are signing deals with tour operators with the same bed and breakfast rates, as were prevailing in the last season.  Moreoever, many hoteliers are also working in concert with airlines, travel agents, car rentals and portals for package offers, not only for tourists but also for corporate meetings as well as weddings and other functions. This is expected to ease recession’s domino effect.

Silver lining

With most hotels anticipating continued drop in visitors through 2009-10, the Ministry of Tourism has asked hotels to keep rates down.  The silver lining though is air tickets as well as lavish dining and some exotic or entertaining or adventurous experiences in many cities have now become more affordable. Cheers to that !!! 

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