The Hindu Business Line : Hotels offer ‘big’ discounts as occupancy falls

Industry observers say many hotels are already seeing 10-15 per cent drop in occupancy, from the national average of 75 per cent. Some hotels have started offering up to 40 per cent discount on rack rates.

R. Ravikumar

Chennai, Nov. 22 The government of India has asked hotels to cut tariffs, by about 10 to 15 per cent, to help sagging tourism, but it need not have bothered. As rooms go abegging, hotels are slashing rates and some are offering big discounts — as much as 40 per cent.

September is the month when hotels here revise (raise) tariffs, usually by 25-30 per cent. This year, because of fall in occupancy and what with many companies cutting travel, hotels raised tariff by just 10 per cent, but even that has not helped matters, says a senior executive of a leading five-star hotel in Chennai.

To sit-out the recession, some hotels have started offering up to 40 per cent discount on rack rates (published rates). Such a practice, say many hoteliers, is not uncommon in the industry. A hotel room is a perishable commodity, occupancy is of paramount importance. “Even during normal times, discounts of about 25-40 per cent to corporate clients or ‘bulk’ customers, depending on their committed number of room-nights, is common,” said Mr Geoff Magee, Chief Executive Officer of Accord Metropolitan, a five-star hotel in Chennai. The General Manager of Taj Coromandel, Chennai, Mr Arindam Kunar, also echoed this view.

‘Slash rates’

Industry observers say many hotels are already seeing 10 to 15 per cent drop in occupancy, from the national average of 75 per cent. Many anticipate a further drop, maybe up to 25 per cent, in 2009-10.

Which is why the Ministry of Tourism has asked the Federation of Hotel and Restaurants Associations of India (FHRAI) to ask its members to slash rates.

“We, in turn, have sent our circulars (in this regard) to all our members,” says Mr M.P. Purushothaman, President, FHRAI.

Many hoteliers are already operating in collaboration 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 communal functions. This is expected to ease the cascading effect of the recession.

The Travel Manager of a leading software company in Bangalore says his company usually gets 50 to 60 per cent discount on rack rates (published rates) from top five-star hotels across the country on a certain number of room nights a year.

However, with lesser number of our people travelling these days and as a result, lesser room-night demand this year, “we are insisting on the same discount. If the recession continues, we may even renegotiate the deal for an even better price,” he said.

Works in progress

However, there appears to be no rollback of the proposed hotel projects wherever the construction work has started as most of them have already started marketing their inventories abroad. India is expected to add over 1,25,000 rooms to its current 1,50,000 to meet the likely demand during the Commonwealth Games in 2010.