Premium hotels slash tariffs by 15% more

12 Mar 2009, ET Bureau


MUMBAI: Premium hotel chains across the country have cut prices by another 15% to lure customers as the global credit crunch continues. This is the second price cut by five star hotel chains in nearly four months. They reduced room rates in December-January.

After the recent cuts, room rates at five-star hotels in India are around 30% to 35% lower than what they were a year ago. In Delhi, average room rates (ARR) have come down to Rs 10,000-Rs 12,000 from Rs 16,000 to Rs 18,000. In Mumbai, room tariffs are down to Rs 7,500-Rs 9,000 from Rs 10,000 to Rs 12,000. Budget hotels will also reduce room rates by 8-10%. Room tariffs in budget hotels vary from Rs 3,000 to Rs 8,000.

“We are only going to see room rates softening to more realistic levels in the future,” said Manav Thadani, managing director, HVS, a hotel consultancy firm.

Hotel companies like Leela, Oberoi, Mariott, Hyaat, ITC and Lemon Tree are understood to be offering special packages, discounts and daily room rates to tackle the drop in occupancy, which is currently at 65-70% against last year’s 85%.

With the peak season coming to an end in March, and the beginning of lean season starting from April to September, hotel companies are worried that margins will be under pressure this year. There are signs that hotels are locked in a fierce price war, industry officials said.

”With the advent of the lean season, there will be a few special packages that the hotels will offer to sustain occupancy during weekends and public holidays,” Devendra Bharma, executive vice-president, Oberoi Hotels & Resorts, Mumbai said.

The hotel industry has been witnessing a slowdown since November last year, with leisure and corporate travel taking a major hit post the Mumbai terror attacks. However, resort destinations like Kerala, Jaipur and Goa are bucking the trend.

“We hope that post the elections, economy will be stable, tourist inflow will pick up and the outlook will become positive for hotel companies,” said Leela VC & MD Vivek Nair. Hotels are getting fiercely price competitive. With rack rates becoming obsolete, hotel chains are currently following web rates. “We have started daily room rates based on the projected occupancy in a particular period,” said Mr Nair.

In addition, an oversupply in several cites like Pune, Hyderabad and Bangalore has affected room rates and occupancies, said Patu Keswani, managing director, Lemon Tree. Experts feel another reason for fall in room rates is India Inc’s cost cutting moves.