Hotels plan 10% hike in room tariffs

NEW DELHI: Cautious hoteliers are planning to raise room tariffs by 5-10% before the peak season begins in September, as they see corporate travel perking up on the back of encouraging financial results. Senior executives at hotel companies, such as ITC Hotels, The Leela and The Lalit, believe that corporate travel spends are expected to increase by the third quarter of the current year.

���The volumes are picking up in the tourism segment and corporate travel spends are showing signs of an improvement. The hotel industry is expected to moderately increase prices before the winter season,��� said Vivek Nair, vice-chairman and managing director of the Leela Hotels, Palaces & Resorts. A senior executive at ITC Hotels also said that a hike in room rates is in the offing, although it would be executed cautiously so that it doesn���t impact occupancy.

The economic slowdown has resulted in a decline in tourist and corporate travel, leading to hotels surviving lower occupancies by discounting room tariffs by 30-40% in the first half of the calendar year 2009. Today, a typical room for a night in a five-star hotel will cost Rs 9,000- 10,000 in Delhi and Rs 10,000-11,000 in Mumbai, almost 45% lower than published rates.

So, the plan by hotel companies to hike room rates signals a pick up in demand, which has been catalysed by corporates willingness to increase spends on travel.

���The sense one gets from large corporate houses as well as corporate travel management firms is that conferences and corporate travel spends will increase in the next few months. This could mean that the industry will increase prices to improve profitability,��� said Shobu Mathew, vice-president of sales at the Lalit Suri Hospitality Group.
Given the drop in business volumes this year, hospitality consultants had initially ruled out the possibility of hotels going ahead with their annual rate hike before the winter season.

���In the past three years, room rates were increased by 20-30% every year before the winter season. This year, it would be about 10%. Already, advance bookings for leisure tourists are being done at an increased room tariff,��� said Ajay Bakaya, executive director of Sarovar Hotels, which operates properties under its own brand and runs US-based Carlson Hotels��� mid-market hospitality brands, Park Plaza and Park Inn.