Hit by the slowdown and the resultant drop in occupancy levels, most hotels in the country may not revise tariffs this year. Usually, September-October is when hotels revise tariffs every year, as arrivals of foreign tourists peak during this time and sustain till mid-December.
There is no question of revising the room tariff further at a time when the existing room rates have come under severe pressure, and hotels are already offering 30-50 per cent discount to sit out the global meltdown, says Mr M. P. Purushothaman, President, Federation of Hotel and Restaurant Associations of India. Mr T. Natarajan, CEO, GRT Hotels and Resorts and Honorary Secretary of the South India Hotels and Restaurants Association, too endorses this viewpoint.
According to the United Nations World Tourism Organisation, international tourist arrivals dropped by 1 per cent in the second half of 2008. There are no signs yet that this downward trend will be reversed in 2009. Arrival numbers are forecast to be flat at best.
The travel and tourism economy is likely to contract by 3.5 per cent in 2009 and expand by only 0.25 per cent in 2010, said Mr P. R. S. Oberoi, Chairman of Oberoi Group of Hotels, quoting the World Travel and Tourism Council’s forecast. According to Mr Oberoi, rates will remain under pressure at least till the third quarter of 2010.
“Though we see a great tourism potential in the long term, the short-term outlook seems very gloomy. There is not going to be any dramatic growth in tourist arrivals, be it foreign or domestic,” says Mr Rajeev Menon, Area Vice-President, J.W. Marriott Hotels & Resorts. He says, if at all, hotels choose to revise tariffs the “rates can move only sideways”.
While this is the national trend, hotels in Chennai are experiencing an additional burden. In Tamil Nadu, the 12.5 per cent luxury tax is levied on published tariffs, and not on actual (discounted) rates. This leaves most hotels in the city facing the “unhappy guest”. “If my guest asks me why should he pay tax on published tariff when he paid only half of it as room rent, I don’t have an answer,” says Mr Palani G. Periyasamy, Chairman, Appu Hotels Ltd that owns the 240-room Le Royal Meridien hotel in Chennai. So, some hotels in the city charge a flat rate (including the luxury tax), which is almost 40 per cent lower than the rack rate.
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