Hotel tariffs to melt in slowdown heat

Current room
rates (avg) Projected Decline Decline % Bangalore14,00012,7001,3009.29 Chennai7,2006,8004005.55 Hyderabad7,5007,1004005.33 Figures in Rs                                                          Source: Crisil Research  Large players like ITC Hotels and East India Hotels, which runs the Oberoi chain, denied any move to reduce their room rates, though some hotels told Business Standard that such a move was indeed on the cards.  A five-star hotel in north Mumbai is mulling a rate cut, while it has added other services like free breakfast and free airport-drop for its clients. The hotel charges around Rs 12,000 per room at present. Another player in the leisure segment has already revised the rates for its properties in Goa and Kerala.  This could impact the price of hotel stocks in the market. "If business recorded in the next couple of months is weaker than usual, there could be downgrading of hotel sector stocks," said a Mumbai-based investment analyst.  Though hotels are unwilling to talk about it openly, several travel houses, which book hotels for customers, said they had recorded a significant drop in travel bookings.  Mumbai-based Sree Raj Travels, for instance, has seen a drop of over 36 per cent in international travel bookings between January and May 2008.  This comes at a time when new hotels are coming up across the length and breadth of the country. With 39 hotels under various stages of development, Bangalore will have 3,000 rooms by 2008-09, as compared with the present 2,300, an increase of 30 per cent.  Hyderabad will have around 2,200 rooms by 2008-09 as compared with the existing 1,600, an increase of 38 per cent. The most dramatic increase will be in Chennai, where the supply will go up by 30 per cent in a year, while the demand is projected to rise 15 per cent.  To make matters worse, the cost of building a hotel could go up by 20 per cent in the current situation, experts said. Construction of the building makes 50 per cent of the cost of any hotel.