Highway liquor ban: Hotels stare at high alocohol inventory

Inventory risk of getting spoilt due to not being properly stocked in ideal temperature

Ankur Bhatia is a worried man. The Roseate, a luxury hotel promoted by him on NH-8, is sitting on a sealed liquor stock, mostly expensive wines and whiskies, worth Rs 60 lakh. Bhatia has not been able to remove or sell a single bottle from the large inventory for last 18 days, thanks to the recent Supreme Court order which prevents sale of alcohol by all establishments situated within 500 metres of the national and state highways from April 1.

“Most of the blocked inventory at my hotel are expensive wines which I need to stock in a certain temperature or it will get spoiled. The fate of this stock is not known and there is a daily cost of capital and maintaining this inventory. Hope there is a way out soon and hotels are permitted to serve alcohol to guests,” said Bhatia. 

Food and beverage forms half of the revenue for the Roseate, which has three restaurants and a banquet. “In the last two weeks, the footfalls have come down drastically at there is domino effect due to our inability to serve alcohol. People have stopped coming for food,” Bhatia said.

Bhatia is not alone. Thousands of hotels and restaurants have taken a hit as a result of the order and are stuck with sizeable alcohol inventory. At many places, the inventory has not been properly stocked in ideal temperature and run the risk of getting spoilt. Beers, a popular drink during the summers, have a short shelf life of up to six months. Hotels usually hold stock sufficient for up to a month. But most establishments stock a little more in March, the last year of fiscal year, since it takes for new supplies to begin in April. Hotels and restaurants have also paid hundreds of crores as fee to serve liquor to their guests for the fiscal that started from April. 

The Roseate is estimated to have paid a liquor vend fee of Rs 1 crore (approximately) to be able to serve alcohol at its three restaurants, a banquet and the guest rooms during FY18. “If you multiply the cost of this inventory and the vend fee that industry has paid and is unable to use, it would run in thousands of crores at a national level,” said Bhatia. 

Raj Rana, chief executive officer (South Asia) at international hotel company Carlson Rezidor, said one-third of the 84 hotels operated by the company is hit by the decision on liquor. “Hotels with extensive F&B outlets hold liquor inventory worth Rs 50-60 lakh. Mid to small hotels have stocks worth Rs 10 lakh. We have been hit in more than one way. This inventory was supposed to bring revenue but now it is a drag on revenue,” said Rana, whose company owns hotel brands like Radisson and Park Plaza. 

The fallout of the SC order is also being seen in the new investments. Ginger Hotels, owned by Tata Group’s Indian Hotels Company, was planning to introduce a bar in twelve hotels this year to expand F&B revenues. “The plan has been put in abeyance post the Supreme Court decision,” said Rahul Pandit, the MD & CEO.