With the global economic slowdown and recent terror attacks in Mumbai affecting the hospitality industry in Karnataka, the Federation of Hotel and Restaurant Associations of India (FHRAI), has requested the state government to charge luxury tax on actual room rates instead of the published tariff till business conditions improve.
At present, the state government charges 12 per cent luxury tax on published room rates of hotels instead of the actual rate charged. Hotel industry players say that they are facing a condition of low occupancy rates and tax levied on published rates may not go down well with guests.
“In view of the massive meltdown in the hotel industry causing revenues to plummet, it would be appropriate that the government of Karnataka accepts the industry’s plea to revert to charging luxury tax on actual room rates instead of the published tariff, as is the practice in almost all states in India,” said Vivek Nair, executive committee member, FHRAI. He added that till the business conditions improve and occupancy rates increase, luxury rates be reduced to 8 per cent instead of 12 per cent to increase the demand for rooms.
Industry players say that in the high-end hotels in the city, occupancy rates have fallen to as low as 20-30 per cent with some hotels hosting only airline crew members. Hotel players put the average room rate (ARR) at Bangalore at around Rs 14,000. Naxir said that in the deluxe category of hotels, the ARR could fall by nearly 15 per cent in the coming days.
In view of the sluggish market, the hotel industry has, in principle, decided to bring down the published rates in their room tariff card by around 10-20 per cent. Sanjay Khan, CMD of World Resorts said that the hxx did not allow necessary support.
