Hotel Industry To Move Govt Against Single-Tariff Norm

The two leading apex bodies of hotels, the Federation of Hotel & Restaurant Association of India (FHRAI) and the Hotel Association of India (HAI), will be moving the government against the recently-issued notification directing all registered hotels to do away with the dual tariff system and replacing it with one tariff - either in rupees or in US dollar - only.

A similar government order issued in 1993 had been kept in abeyance vide another department of tourism order dated January 4, 1994, as it had raised the hackles of the hotel industry, specially of those chains operating five-star and deluxe hotels.

 

The FHRAI executive committee, which will meet in a couple of days in an emrgency meeting, will chalk out an action plan to oppose the move to have one tariff system as it would affect their income as also the foreign exchange being earned by the government. The HAI is also toying with the idea of presenting its viewpoint on the issue.

According to Jose Dominic of Casino Group of Hotels, who is also a member of the FHRAI executive committee, the practice of dual pricing is well accepted...(and) the present order, therefore, is reminiscent of the days of the regulatory raj which we all believed was being given a decent burial. Similarly, a HAI member said that the order was an arbitrary one.

However, industry analysts said that the government could issue such directives through the department of tourism as most hotels seek approval from the department. Thus, the order was not an arbitrary one.

The industry viewpoint, however, is that having one tariff either in rupee or in US dollar is not practical and the formula is workable only when the published rate cards are followed by hotels - a norm which makes up for just about 10 per cent of the total business done by major chains. Most hotels have different pricing strategies and offer discounts in various forms to their foreign and Indian guests.

Said a senior executive of a leading hotel: The government theory is not workable as most hotels do follow a dual pricing with the published rate card yielding just about 10 per cent of the total business and the rest coming in from various discount schemes.

Most hotels follow various pricing policies. For example, a leading Japanese company giving a five-star hotel in Mumbai about 3,000 room-nights business every year is charged a scaled down tariff in dollars and not the rate card tariff.

Moreover, the hotel industry is faced with another problem. If they have just `one tariff -either in rupees or in dollars- a certain section of their clientale is bound to be displeased. For example, a dollar-denominated tariff would irk Indian guests, who form a substantial 30 per cent of a hotels business.

Suppose an Indian has booked a room in my hotel three months back and when he finally arrives how can I ask him then to pay an increased tariff rate as the rupee may got further devalued by then? asked an executive of another five-star hotel chain.

With foreigners making up for about 70 per cent business of most hotels, a marketing and sales head of another hotel reluctantly admitted, If the DoT ordert is finally implemented well have to raise the hotel tariff for Indians too, which will certainly eat into our revenue, but then it will also eat into the forex earnings.

However, a Mumbai-based industry analyst feels that if the order is implemented, then most hotels will do away with rupee-denominated tariff rates preferring to have just dollar-denominated tariffs.

Offering another solution, he said: If there is one tariff in either dollar or rupee and the diffderence between tariff rates for Indians and foreigners are to be removed, then to please their Indian guests, the hotels will have to offer a higher discount.