Liquor ban to hit hotel staff too, said Raj Rana

The hotels sector was hit in March-end when the Supreme Court banned sale of alcohol at all establishments within 500 metres of highways. Another impact on bigger hotels will come from a Goods and Services Tax (GST) rate of 28 per cent on room rates of Rs 5,000 and above. Raj Rana, chief executive officer (South Asia) at international hotel company Carlson Rezidor, which operates 84 hotels in this country, to Ajay Modi. Edited excerpts:  

It has been almost two months that the Supreme Court banned sale of liquor at establishments within 500 metres of highways. What have been the challenges?

Initially, there was panic. The order is well intended to address the social problem of alcohol drinking but has an impact on legitimate businesses where owners have invested with expectation of returns. A good part of the business has gone away. A third of our hotels are impacted and the livelihood of many employees who work in bars and serve liquor is at stake. We are trying to find them alternative roles. Many have been asked to avail of leave; we have not yet told them that we cannot employ them. The fact is that we have an obligation to deliver on margins. Employees would be affected, with the owners, if the situation does not change.

What is the impact on meetings and the convention business?

The decision impacts India’s image as a progressive destination, where we are trying to attract more of the corporate and convention business. Enjoying a glass of wine is an accepted norm worldwide. We have seen some cancellations for the coming months. There was no cancellation in April as it is difficult to get alternate arrangements at short notice. We have seen a shift in business patterns (of conferences and weddings) for the coming months. We did see the footfall traffic go down in bars and lounges since last month.

How significant is the food and beverage business for hotels? Is there an impact on booking of rooms?

F&B is a very important part of business for full-service hotels. Almost half the revenue for us and most brands come from there. That is a direct impact and there is also an indirect impact. You might be organising a party using F&B but also need a room. If you are not able to enjoy the beverage experience, the rooms are also affected. It has a cascading impact on the room business as well.  

Will margins for the affected hotels be under pressure?

Without a doubt. If there is no alternative choice to a hotel in a location, it won’t be impacted. If there is one, the business will take a hit. The hospitality sector had started coming out of the woods in 2016. We started seeing growth in occupancy and average tariffs (rates); hiring was on the increase. In fact, everything was positive. There was short-term caution due to demonetisation but it did not have a measurable impact. The liquor ban and now the GST rate (28 per cent on rooms above Rs 5,000) is a challenge we need to cope with. The rules of the game have been changed midway. It has put us in a hardship position.

What will be your Plan-B for these hotels?

We are trying to introduce exciting, innovative mocktails. In our F&B department, we are trying to enhance the experience of the guests, so that they are drawn to socialising with mocktails. It is not the alcohol alone but the ability to get along with friends and family is important. If focus can be shifted from the beverage to the group and ambience, maybe some business can be captured.  

By year-end how many new hotels will Carlson add?

We hope to add eight-nine new hotels this year. We hope to reach 170 hotels in India by 2020. We sign a new hotel every four weeks and open one every six weeks. The pace of signing continues more in the mid-scale segment. We want to continue going to newer locations.