For now, top hotels are holding the priceline for room rates
2 min read . Updated: 31 May 2020, 07:41 PM IST
Premium- Luxury business hotels in cities may see a revenue drop of 50-70% this year, particularly the five-star hotels
- The budget hotel segment would similarly see pricing pressure of up to 20%
NEW DELHI : As hotels and other hospitality services reopen from June 8, expect a grinding journey ahead for many months. Occupancies could half for some categories of hotels while room rates would remain under pressure for the rest of the year. Hotels in states and cities dependant on foreign tourists, in particular, are expected to have a bumpier ride in the winter of 2020.
A ‘General Manager’s Sentiment Survey’ by HVS and ANAROCK Property Consultants, which captured the responses of 160 General Managers (GMs) across branded hotels in India stated that occupancy is likely to range between 40% and 50% in the last quarter of 2020. Nevertheless, over 71% of the GMs said they won’t discount their average daily rates (ADR) by more than 20%. The survey stated that there could be higher discounting in economy and midscale hotels while upscale and luxury hotels will discount the least.
Industry experts Mint spoke to said that luxury business hotels in cities may see a revenue drop of 50-70% this year, particularly the five-star hotels in business suburbs such as Gurgaon. Work from home and paranoia around travel will cut business travel quite a bit.
Meanwhile, luxury hotels and resorts catering to foreign tourists in Rajasthan and Agra would have it tough. “Hotels in these places could be down 90% in terms of revenues. They will be dependant on high-end Indian travel. But then most high-end Indian travellers have already seen these hotels. No new high-end luxury hotels have come up in Agra or in Rajasthan in the last 10 years," said Kapil Chopra, founder and CEO of Postcard Hotels and Resorts. In the high-end resorts in these destinations, Chopra sees a room rate drop of about 30% this winter.
“Smart operators in other city business hotels will not drop rates because the occupancy will be lower and they need to protect profitability to a certain extent. The panic operator will drop rates between 10-20%," he added.
The budget hotel segment would similarly see pricing pressure of up to 20%. Vaibhav Aggarwal, co-founder of budget hotel chain FabHotels said that he expects a pressure of anywhere between 10-20% — towards the higher end of that range in the shorter term (3 months) and towards the lower side of that range in the mid-term (over 6 months). “In our surveys, corporates said that they would be willing to pay a higher price for budget stay if there are better hygiene standards. Some of the pricing pressure might get offset by willingness to pay higher for such standards," Aggarwal said.
Brands catering to business travel wouldn’t want to lower prices too much because corporates can make the lower prices the new benchmark even after recovery — they would want a lock-in on the price for the next 24 months, he added.
Rajeev Kohli, joint managing director at Creative Travel, a travel agency, felt that a price war now could make things a lot worse for the travel ecosystem in India. “Over the last few years, Indian hospitality has seen a great deal of competition only on price — airlines, travel agents, tour operators. That has hurt all of us," he said. “For the next six months, some special deals or special value add-ons are a better option than dumping prices."
