'Budget' hotels forced to revise room rates upwards

Much like budget airlines that revolutionised air travel in the country with no-frills service and low airfares, budget hotels too started off a few years ago with the promise to offer affordable, standardised branded hotel rooms at prices matching the unorganised sector.

Lemon Tree, Indian Hotels��� Ginger, ITC Fortune, Clarks Inn, Choice Hotels, Sarovar Hotels and other budget brands introduced the dream of cheaper, if not exactly cheap, hotel rooms. But much like budget airlines, low-priced branded hotels too were forced to revise room rates upwards on the face of escalating real estate and operational costs, to the point that the ���Budget Hotel��� tag become a misnomer with room tariffs crossing Rs 4,500 per night!

Says Suresh Kumar, president of ITC Fortune Park Hotels, ���There is no ���middle��� in Indian hotel industry. The term budget hotel remains undefined in this country. Considering the high room rates, I will call them business hotels rather than budget or mid-segment hotels.���



What���s worse, owing to the current economic slowdown, projects here too are getting delayed or shelved, with just 45% of the rooms announced are under active development, estimates ITC���s Kumar. The culprit, here too, are high land prices and lower FSIs. The cost of construction per room for a luxury hotel is about Rs 1 crore, while for a mid-market it is around Rs 30 40 lakh.

Though players are putting a brave face, they are already working on alternate business models, public-private partnerships, mall-hotels and hotels in smaller cities with lower land costs for instance. Says Prabhat Pani, CEO of Ginger Hotels, ���Availability of skilled manpower could also be another challenge to cope with which the industry will have to prepare for.���