Hotel room rates will see lesser hike

Published: Oct 18, 2012, 06:13 IST | Urvashi Seth |

Hotels had announced that service tax would increase by 10 to 12% from October in keeping with the Union budget; however, dip in demand and increase in number of rooms forced them to cut down on hike to 5%

Did the announced hike in hotel room rates force you to abort travel plans for the winter this year? Well, you might want to give your decision a second thought, and start making plans afresh.

Hoteliers have decided to implement only a marginal hike in room rates, that of about 5 per cent.

The move was prompted by the decline in demand, a direct fall-out of the global economic slowdown.

Pleasant surprise: MiD DAY had reported that service tax on hotel rooms were to rise by 10-12 per cent for the winter season, in keeping with the Union budget, from October. However, the decision has been revised

MiD DAY had reported earlier that service tax on hotel rooms were to rise by 10-12 per cent for the winter season, in accordance with the Union budget (‘Shell out more to holiday in state from October’, July 23). This decision has now been revoked. There will now be only a 5 per cent hike.

This effectively means that you will pay off-season rates during the peak season for winter vacations.

“The 10 per cent rise in room rates was because of service tax. But the recession and inflation can only absorb 5 per cent this year,” said Kamlesh Barot, former president, Federation of Hotel and Restaurant Associations of India also of Western India.

The percentage of abatement provided by the government to hoteliers on hotel rooms and food and beverage (F&B) was 50 per cent and 70 per cent respectively, until last year.

From July 1, this has been reduced by 10 per cent. So customers will be paying a part of the 10 per cent that the hospitality industry is losing on rooms and F&B. The part to be recovered from customers will vary from hotel to hotel.

“Last year, the average room rate (ARR) at star hotels was Rs 4,900 across India. However this season the room rate will be Rs 5,150 instead of Rs 5,400. While demand for leisure and business travel has slumped, the number of rooms has increased. However we might see a better picture in January,” said Barot.

If the study made by the HVS Hospitality Services is to be believed, Mumbai (including Navi Mumbai) witnessed only a 2.2 per cent growth in occupancy in 2011-12, in spite of a 2.5 per cent dip in averages rates during the same period.

The report stated that the South and Central Mumbai micro-markets have been most affected in 2011-12 by a drop in demand, with several offices shifting base to the new North Mumbai business districts in Bandra Kurla Complex (BKC), Andheri- Kurla, Malad, Powai and Vikhroli. Lower commercial rentals, state-of-the-art office facilities, and the area’s proximity to the airport are some of the factors that have led to the shift. 

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