For hoteliers the good old days of 1994 are over. Economic liberalisation that began in 1993 led to such a boom that five-star hotels in Mumbai started charging room rates equivalent to that in New York. But with occupancies going for a toss, hoteliers today have pruned room rates steeply and are ready to bargain for discounts.The continuous change of governments over the past three years has made the foreign investor a wee bit cautious, leading to a slowdown in both foreign investment and business travel. Companies are also cutting costs in order to be competitive.
The five-star status has lost its charm and one now looks for quality hotels providing five-star facilities at cheaper rates. While the business segment is dependent on the vagaries of the Indian economy, the tourist industry is relatively unaffected by the changes in the economy.
The political situation in the country has aggravated the problem. And succesive governments have done little to lure tourists.
A country like China attracts tourists ten times more than that visiting India. The country with its vast and diverse culture and rich flora and fauna could very well emulate these countries and turn itself into a popular tourist destination.
Though hotels are the second largest forex earner in the country, Indian tax rates are not only one of the highest in the world but also vary across the various states.
On the profitability front, the going will not be easy. Supply of rooms is going to increase in the near future. Another opportunity for hoteliers with deep pockets will come in the form of mergers and acquisitions.
Since the future belongs to branded hotels, established hoteliers can buy existing hotel properties and upgrade them with a view to capitalising on them in boom times.