The Hindu : Karnataka / Bangalore News : Tariffs in swish hotels go south

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Tuesday, Jul 14, 2009
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Tariffs in swish hotels go south

Anjana Chandramouly

Bangalore was the only market where rates were abnormal

— Photo: K. Murali Kumar

ROOM FOR CORRECTION: One of the rooms at the Taj West End.

Bangalore: Corporates which cut down on travel expenses can now take a re-look at hotel stays in the IT capital what with tariffs in five star hotels in Bangalore cooling off.

On an average, five-star hotels have dropped their prices by 30 to 40 per cent. For instance, a hotel charging about Rs. 12,000 to Rs. 14,000 a night for a room in July 2008 is now charging Rs. 7,000 to Rs. 8,000.

The hospitality industry is hoping that this cut in tariffs will increase demand, say hoteliers.

“Bangalore hotel tariffs have touched realistic levels. As long as the hotel industry maintains a realistic price level, there will always be demand,” says Raju Louzado, General Manager, Fortune Select JP Cosmos.

He says the branded players have managed to buck the recession.

“A brand is what is supporting us in this recession and the future of hotels is all about branding,” he says.

According to industry analysts, a branded four-star room is available for Rs. 5,000 a night. And move away from the central business district into the suburbs, a branded five-star room comes at that price, they say.

Arindam Kunar, General Manager, The Taj West End, says hotels cut rates more “out of panic” than anything else. Despite recession, “our hotel has seen an increase in the RevPAR (revenue per available room) index, although occupancy is definitely down from last year”. “Prices have dropped in Bangalore, but occupancy levels have not,” he adds.

Hotels in Bangalore have an occupancy rate of about 50 per cent.

There is an upswing in terms of demand and enquiries, especially from corporates, for events and conferences.

About 15 to 18 per cent of business now comes from events and conferences, say hoteliers.

About 80 per cent of business for the city hotels came from the IT and ITeS sectors. “But this has dried up now,” says Subrata Majumder, general manager, The Park.

“For Bangalore to boom again, the U.S. and U.K. economies have to turn around totally,” he adds.

Mr. Kunar points out that the final quarter of the calendar year is when the U.S. economy is expected to see a revival too.

However, some hoteliers believe recovery for the hospitality sector in Bangalore will not be as good or as fast as other markets in the country. “Bangalore, perhaps, was the only market where rates were abnormal. No other market had seen such an abnormal growth.

Hence the fall too was harder in Bangalore. Average room rates of Rs. 7,500 to Rs. 8,000 for a five-star hotel in any other market can be considered very good; but not so in Bangalore. Even when room rates are at that level, hoteliers feel that things aren’t improving,” says Mr. Majumder.

The hotel industry has reached the rock bottom, says Mr. Majumder.

“There is improvement, but to benchmark against the 2005, 2006 and 2007 price levels would be a mistake,” he adds.

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