Holidaying abroad or dining out? Expect to shell out more this summer

A steep rise in the cost of services and consumables is prompting those in the restaurant, travel, and hotel business to revise their rate cards by 10-20% in the coming weeks

Dining out, staying in a hotel and holidaying — both in the country and abroad — are set to pinch Indians more this summer. A steep rise in the cost of services and consumables — ranging from transportation, cooking oil and gas to milk and poultry products, is prompting those in the restaurant, travel, and hotel business to revise their rate cards by 10-20 per cent in the coming weeks. Foreign travel costs have already risen 20-30 per cent over 2019.

A nascent recovery, fragile demand and the lurking fear of the pandemic had prevented them hiking prices all this while. But the recent geo-political instability triggered by the Russian invasion of Ukraine, has stoked inflation to such an extent that service providers may no longer be able to absorb the increase in costs.  

 “The restaurant business is just about recovering. And now there are fresh challenges in the form of inflationary price rise. Typically, most owners revise their rate cards once a year. But now they may be forced to increase menu rates in mid-year too,” said Pranav Rungta, Mumbai chapter head of the National Restaurant Association of India (NRAI).

The increase in raw material prices has pushed up operational expenses by 7 to 8 per cent, Rungta added. Raw materials account for 30-35 per cent of the operating expenses of eateries. Among consumables, restaurant owners are facing the maximum heat from cooking oil. India imports 80 per cent of its sunflower oil from Ukraine and the oil's wholesale price has increased from Rs 150 to 190 per litre since the start of the Ukraine war, said Rungta.

It’s not just oil. Milk prices have shot up, too. Amul has raised the price of milk by Rs 2 per litre, and other milk producers have followed. Consequently, the prices of milk-based products have gone up as well. Chicken prices are also up 20-30 per cent, most of it due to the rise in transportation costs.

“Typically, most restaurants keep an inventory for seven to 10 days and thus get impacted with fluctuations in spot prices,’’ said Rungta.

Worse, retail prices of transportation fuels have been raised in the past two days after a long gap, and more hikes are anticipated in the coming days as oil marketing companies attempt to cover the cost of rising crude oil prices. Also, while the price of domestic cooking gas (LPG) was raised on Tuesday, domestic natural gas prices, too, are expected to be revised upwards from April 1.

Anurag Katriyar, founder and director, Indigo Hospitality, said the current situation has made the increase in the rate card inevitable. “Given the current oil and gas prices, we are compelled to consider a hike by an average of 10-12 per cent,” he said, adding that the idea is to “cover the costs and not profiteer.” He is confident that the price rise won’t affect demand. “People will understand,” he said.

Pradeep Shetty, joint secretary, the Federation of Hotel and Restaurant Associations of India, pointed out that many districts in Maharashtra have not fully reopened and there are still restrictions on the timing and capacity in restaurants. “The general sentiment among restaurants is to increase menu rates. In the next two weeks we could see menu rates go up by 20 per cent," he added.

Hotels in the domestic leisure destinations that used to do brisk business during the peak holiday seasons over the last couple of years, are looking to rake in more this summer. “The average daily rates at most of these destinations have already surpassed the pre-Covid numbers,” said K.B Kachru, vice-president, Hotel Association of India. Rates are expected to head further north as vacationers escape to the cooler climes to beat the summer heat.    

Holidaying abroad this summer will be prohibitive as well. On an average, tour costs have increased by around 20 to 30 per cent compared to the summer of 2019. The increase is primarily due to higher airfares, the increase in surface transport costs and rupee depreciation, according to branded tour operators. They expect prices to moderate once international commercial flights resume and airlines add more capacity.

“Flights are limited due to air transport bubbles and demand is abnormally high as it was suppressed for the last two years. I expect oil prices to settle down as oil producing countries plan to pump more oil,” said Madhavan Menon, Chairman, Thomas Cook India, adding that tour costs have increased by around 20 to 25 per cent over the summer of 2019.  

Rakshit Desai, managing director (India), Flight Centre Travel Group Tour, said costs are up nearly 30 per cent compared to the summer of 2019. “Two years ago, a Mumbai-Dubai return air ticket would cost Rs 15,000-Rs 20,000. It has now increased to Rs 35,000- Rs 40,000. Even hotel rates have increased. A decent four-five star accommodation in Dubai that came for $150 per night now cost $200-$250,” said Desai.

Desai attributes the higher rates to a strong pent up demand and the fact that it is concentrated in a few destinations. For instance, New Zealand is still not open for tourists and European countries have restrictions regarding booster vaccines. This, together with the changes in regulations and the cancellation of flights, are impacting travel plans, he said. “Right now, companies have to price it for disruption while selling the packages,” he added.

Desai expects all this to get streamlined by the June quarter, which, in turn, could lower travellers' trip costs.