Mumbai: Faced with falling occupancies and a severe downturn in demand, hotels are lowering room tariffs and offering special packages, but occupancies are yet to pick up, industry officials said.

Firms such as Hotel Leelaventure Ltd, Asian Hotels and EIH Ltd have been cutting average room rates or coming out with special ‘family package’ offers, but are yet to see a rise in occupancy, officials and analysts said.

Hotel Leela has cut room rates across key city business properties in Mumbai and Bangalore in an attempt to offset falling occupancy levels.

The company has cut rates at Bangalore’s Leela Palace to Rs11,000-Rs12,000 (April-May) from Rs15,000 last year.

This property alone contributes about 38% of its overall revenues. Rates at its Mumbai hotel have also softened to Rs9,000 rupees per room from about Rs12,000.

“Occupancies are also down compared to last year, business travel has been impacted because of the global meltdown, though India has been affected much less than other countries,” Leela’s senior vice president Rajiv Kaul told Reuters.

Consequently, the revenues earned per room (RevPars) has also dropped.

“There is a drop in RevPars of about 25% compared to last year,” Kaul said, referring to the industry scenario.

“We are hoping we will be able to reverse the trend from the third quarter onwards.”

Rates at Asian Hotels Ltd, which operates the ‘Hyatt Regency’ chain have also dropped in line with the market, said Sushil Gupta, managing director (west).

“Our Delhi and Mumbai properties are averaging around Rs9,000. Last year they were about Rs12,000. Room rates have dropped because of the downturn,” Gupta said.

Bookings Down, Challenges Remain

The hotel industry has faced unprecedented challenges since the second half of 2008 as an economic slowdown dampened corporate spending and last November’s terror attacks in Mumbai nearly crippled demand.

While India has recovered from the aftermath of the terror attacks, corporate spending was still weak and is likely to remain so in the near term said Sridhar Chandrashekar, head of research at Crisil Ltd.

“If you go by fundamentals you are most likely to see the curtailment in corporate spending for some time to come. To that extent the sector will continue to be under stress,” he said.

Occupancy levels have fallen to around 63% in the first four months of 2009 from 78% a year ago, a study by Crisil across major business and leisure hotels showed.

The window for advance bookings had also narrowed to just 3-4 days now, making forecasting on occupancy levels all the more difficult, Rattan Keswani, president of Trident Hotels, said.

EIH Ltd’s Trident, which along with Indian Hotels Taj Mahal Palace, was among the sites hit by the terror attacks, has been trying to woo customers through special family packages.

It has also marginally lowered room rates for its south Mumbai luxury business hotel to Rs10,500 now from about Rs11,200 last year, but Keswani said occupancy at the hotel continues to remain below last year’s levels.

“Bookings are not yet showing an upswing. Because of the swine flu and everything else, travel is disturbed and lower than what we saw last year,” Keswani said, referring to the worldwide epidemic caused by the H1N1 virus.