Are High Hotel Tariffs Damaging India’s Tourism Potential?
Industry analysts fear that the current boom which the Indian hospitality industry is witnessing will not last. The prime reasons cited are steep hotel rates and shortage of rooms. Leading tour operators, in conversation with Bhisham Mansukhani and Charmaine Fernz share their opinion on this current scenario...
The Indian hospitality’s current occupancy boom, which revived the industry from its days in shambles, is now posing a serious threat to the supposedly resurgent inbound tourism sector. Inbound tour operators have unanimously cited both the steep Average Room Rates (ARRs) and shortfall in inventory as key deterrents that ...view middle of the document...
This demand-supply issue is short-term and mainly due to a lack of rooms. Hotels look at this opportunity as the best possible way to extract maximum prices. In the future, more development of hotel rooms will ensure lower tariffs and more supply. If one has to compare the Indian hotel rates with their South East Asian counterparts, Indian hotels are 50 per cent higher.”
Rohit Kohli, director - operations, Creative Travels
“India as a destination has indeed out-priced itself and in comparison to its competitors it has lost the competitive edge. What the inbound industry is witnessing is an increase in pricing without hotels actually improving the quality and standards. In fact, to cite an example, this summer season has witnessed a reduced growth of about 10 per cent as compared to last year’s summer season. One needs to realise that the hotel component forms quite a major portion of a travel or tour package. And considering that these hotel prices fluctuate at about 100-150 per cent, it certainly leaves the market in a very dicey position.”
Ajay Bali, CEO, TQ3 India
“There is an approach tour operators can use to an extent to hedge their risks. Negotiated rates are one way that tour operators can insulate themselves against a spike in room rates and even shortage of rooms. However, this approach of pre-booking gives both the tour operator and his client little or no room for manoeuvre to itenary or number of days spent in India. For instance, tourists will be reluctant to make impulse trips within the country which would have otherwise added to the tourism economy, which is typically the strength of a long haul destination. Room rates have gone up by 30 per cent.
Lalit Sheth, chairman and managing director, Raj Travels