Hotels may hike corporate rates by 15% from January amid surge in demand

Amid a strong pan-Indian demand across segments, hotel chains in India are looking to re-negotiate contracts with corporate firms. The new rates — expected to go up at least by 15 per cent from now — will take effect from January 2023.

Renegotiating contracts is an annual exercise and hotels typically increase rates by 5-7 per cent when signing a contract for a new year, but the pandemic forced them to defer such a revision for two consecutive years.

Resumption of work from office, meetings, incentives, conferences, exhibitions (MICE), and corporate travel making a strong comeback have jacked up average daily rates (ADRs) at most firms. Most hotels are already commanding 15-20 per cent higher rates compared to 2019 for the non-contracted rooms. This is bolstering hospitality firms, prompting them to quote a higher price to corporate houses when the contracts are renewed, say hotel executives. 

“International chains are looking to hike rates by 20-40 per cent for request for proposal (RFP) businesses. The idea is to mitigate losses in the last two years, with no increase in rates,” said Sangeeta Mohan, director, asset management at SAMHI Hotels. SAMHI is the hotel owner and asset manager for various brands of Marriott International, IHG and Hyatt across 12 cities in India.

“Across the industry, be it Marriott or Hyatt, the diktat from the corporate office is to increase rates at least by 15 per cent,” said Mohan, adding that corporates were open to it and this indicates that there is acceptance in the market.

Sachin Mylavarapu, area director of operations, South & East India, Bangladesh and Sri Lanka, Marriott International, said the quantum of increase hotels get at the time of contract renewal will be guided by the volume of business. “There has been some correction in the last couple of years, but it is yet to reach the 2019 levels,” he said, referring to the corporate rates.

In a recent interview to Business Standard, Mark Willis, CEO, India, Middle East, Africa and Turkey, at French hospitality major Accor, said, “I am encouraging the team here to push up the rates across the country as the demand is pretty strong.”

Mumbai and Delhi are in the same league as New York, Hong Kong, London and Paris, still the rates they command are behind by at least 30-40 per cent. The rate in the luxury segment in the two Indian cities is $150-$180, while in London it is $400-450. That’s a big difference. “This is something we are looking to change,” he said.

Increase in special negotiated rates for corporates also jack up the rates of rooms that are non-contracted and prices inch up for retails segment, too. This quantum of increase for the latter is higher, explained Mohan.

An email to Indian Hotel, ITC Hotel and Radisson on Friday, remained answered.

For FY23, CareEdge expects the pan-Indian average hotel occupancy to be at 67-69 per cent, which shall surpass the pre-Covid levels and the average room rate of Rs 5,800-6,000, thereby leading to margin expansion for the players, the credit rating firm said in a report last week.