The industry is heavily taxed in various forms and almost 25 per cent of the revenues goes into taxes.
The economic down turn is directly hitting the hospitality industry in the country. “During these troubled times, the businesses want so save as much as possible in their expenditure. Luxury hotels get more affected because every business wants to tighten its belt. Either customers reduce their travel or try to return home in the same day without going to a hotel,” said Chander Baljee, chairman and managing director, Royal Orchid Hotels.
This business will shift to the lower range of hotels. Customers who can visit five star deluxe hotels confine to five start hotels, shrinking the overall market, he said.
Talking about the relation between the growth in GDP and demand in room supply, he said, “If economy is growing at 6-8 per cent, the room demand will increase by 10 per cent. The industry can do well if 10-15 per cent of inventory gets added every year. However, everybody wants to get in to it and start a business if industry is doing well, which is leading to a disaster,”
Though many cities are growing, the industry is mostly concentrated in the capital cities as the most of the commercial activity tends to be there, Baljee said.
On the growth rate, he said, “There is a slowdown in the growth of hospitality industry this year. The reason being there is a growth in the last two years as the industry had come out of the troubled times of the previous two years. However, being a chain of hotels and offering services at different locations, we will not get affected to that extent because some locations do well even if some don’t,”
The demand supply ratio should not be looked from a country perspective. It varies by location such as micro market to macro market. For instance, in the case of Hitech City, there will be oversupply soon. However, this may be temporary with demand picking up soon, he said.
Talking about challenges of the industry, he said, “Availability of human resource continues to be a problem until industry does something on it. For instance, we have started our own training institute to create our own human resource. Developing human resource will also be a selling point to the hotels.
The industry is also heavily taxed in various forms and almost 25 per cent of the revenues goes in to it. On top of it, there are taxes like excise duty and income taxes,”
Running an individual is not easy any more. The industry is driven by technical skills and marketing is happening through wide variety ways from Facebook,Twitter to global distribution networks in electronic payments throughout the country.
High quality human resource is required to run and manage such complex tasks and generate sales. However, the individual hotels cannot afford them. Tie-ups between the hotels or being part of the chain will help individual hotels to standardise systems and can also have economies of scale in operations, he added.