The supreme court order banning sale of liquor on national and state highways is expected to “severely lash” revenues from the food & beverage and the room demand segment of premium hotels across 12 cities
The supreme court order banning sale of liquor on national and state highways is expected to “severely lash” revenues from the food & beverage and the room demand segment of premium hotels across 12 cities, Crisil Research said in a report on Thursday. Of the 384 premium hotels assessed by Crisil across the National Capital Region, Mumbai, Kolkata, Chennai, Hyderabad, Goa, Pune, Agra, Jaipur, Ahmedabad, Bengaluru and Kerala, 27%, or 102 hotels, have been found to be affected, and would be compelled to stop liquor sales.
The major impact would be encountered by cities such as Pune, Kolkata and Agra, the report said.
Liquor sale alone accounts for 10-30% share of the total food and beverage revenue. This forms about 5% to 15% of revenues and differs property-wise. But the impact on revenue is expected to be higher as it will also impact the revenue from the meetings, incentives, conferences and exhibitions (MICE) segment, and the room demand segment.
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“The judgement is expected to lead to shift of meetings, incentives, conferences, exhibitions (MICE) events and weddings from the hotels situated along highways to hotels that continue to serve liquor,” the report said. It added, “Demand for rooms is also expected to witness an impact especially in locations that have higher MICE demand and foreign travellers.”.
All these factors together will have a major impact on revenue for hotels on highways and will also result in decline in profitability for the players, the report said.
Since April 1, 2017, premium-segment hotels, which fall within the 500-metre range of a national highway or state highway, have been directed to stop selling and serving liquor.
The report further notes that hotels within cities will now pose a major competition to premium-segment hotels on the highway. “The competition will not only be restricted to premium segment hotels but will trickle down to the 4- and 3-star category as well. As a result of the ban, the booking window period is also expected to shorten thus building the pressure,” the report said.
Pune, Kolkata and Agra witness the highest impact, as 71%, 69% and 67% hotels, respectively, have been affected due to the liquor ban. However, Mumbai and Goa have escaped the blow as no major state or national highway passes near premium-segment hotels.