Business: Hotels; Rooms to Let

In an effort to prop up their sagging bottom lines luxury hotel chains across the country are offering fabulous discounts to the business traveller.

Dara Billimoria has reasons to be pleased with himself. Every year, the general manager of the Maharashtra State Lawn Tennis Association booked hotel rooms for professional tennis players who come to Mumbai to participate in the Challenger Tournament. Till now, he used to mostly put them up in first-rate economy hotels in the city. But this year he set his sights higher. All it took was some hard bargaining and Billimoria got himself a deal. This year, the players will be staying in five-star comfort at a leading hotel in the city. All for a mere Rs 3,000 per day including taxes and breakfast.

GOING ABEGGING

Hit by the recession, many corporates have cut down their travel budgets.

Occupancy rates in metros have fallen from about 70-74 per cent in 1995-96 to about 46-50 per cent now.

To woo the business traveller, hotels are offering discounts up to 50 per cent on the room tariff ...

... and are topping that with freebies like airport pick-up, breakfast, dinner and even a fax machine in the room.

Luxury hotels across the country, where rooms once went for a premium, are bending over backward to attract customers. Thanks to cost-cutting by recession-hit corporates, hotel occupancy rates have slid dramatically in the past couple of years. In the first 10 months of 1997, Delhi's luxury hotels claimed an occupancy rate of almost 74 per cent. The figure has taken an alarming knock during the same period this year. The various five-star hotels with over 3,500 rooms on offer recorded just 46 per cent occupancy. It's no better in Mumbai. The Tata-owned Indian Hotels Ltd (IHL) which runs the Taj chain of hotels recorded 67 per cent occupancy rate in the city in 1997. So far this year, it has hovered at about 55 per cent.

The drop in occupancy rates has had a telling effect on the bottom lines of the major players. East India Hotels Ltd (EIHL) second quarter net profit increased from Rs 23.67 crore last year to Rs 26.77 crore this year. The increase was marginal in case of IHL, from Rs 24.02 crore to Rs 24.96 crore. And ITC Hotels, which runs the Welcomgroup chain, reported a Rs 2 crore loss against a Rs 4.8 crore profit last year.

"When companies are rationalising costs, the first casualties are travel and advertising," admits Rabindra Seth, a consultant at ITC Hotels Ltd. Certainly, shrinking travel budgets have forced corporates to look for cheaper alternatives. ANZ Grindlays, for instance, has rented an entire building in Chennai and runs it like a hotel for touring staff.

The loss of business from the corporate traveller has forced luxury hotel chains to slash their rates. Resorting to frenzied undercutting, these chains are offering single rooms for as little as Rs 3,000-6,700. That's almost 50 per cent off on the printed tariff.

Bulk bookings can attract even larger discounts. "You can fix the rate to fit your pocket if your company is a regular customer," says an employee of a TV music channel that is due to hold its annual awards ceremony in Delhi later this month. The channel which has booked around 1,000 room nights at the Taj properties and The Park has been offered an average room rate of around $110 (Rs 4,620).

"There seems to be no bottom to the rate," says Arjun Sharma, joint managing director of Sita Travels. He says discounts on last minute bookings, especially at large deluxe hotels, are usually higher than 50 per cent. "A vacant room is a perishable commodity and rather than letting it go, the hotel prefers to fill it up," says he. But hotels are careful not to bring down the tariff so much that it impacts the brand's image. So the discounts are topped with dollops of freebies. Free breakfast and in some cases even dinner, discounts on local phone calls, laundry and liquor tabs, a complimentary pick-up from the airport, a fax machine in the room and monogrammed letterheads try and lure the corporate traveller. "Offering additional value is one route," admits EIHL President Ravi Bhoothalingam.

The desperation of the industry to fill vacant rooms has not gone unnoticed. Loretta John, who handles travel services at Hongkong Bank in Mumbai, has suddenly discovered a new bargaining tool. "All we have to do is tell one hotel that a rival is offering us a better deal and they match it," says she. Touring officials from overseas are booked at the Taj and the Oberoi for under $200.

Analysts see the flurry of rebates as a correction of overpriced tariffs. Most deluxe hotels raised their tariffs by almost 50 per cent during the boom years from 1993 to 1996. But capacity addition and the economic recession caused a glut in the ensuing years.

So, is there any hope for premium hotels in these hard times? The industry is divided. Bhoothalingam expects business to pick up only in the next 18 months. Seth of ITC also does not expect a major turnaround of fortunes in the next six months. But IHL Managing Director Krishna Kumar sees a distinct upswing in business. "We're seeing a surge in conferences and business delegations. For the next two months, the Taj hotels in Mumbai are fully booked. This might be the first green shoots of a new upturn," he says. The industry is hoping that his optimism is not misplaced.