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India's Hotel Chains Raising Room Rates by 10-12% as
Corporate Clients Resume Travel Spending

By Madhurima Nandy, Mint, New DelhiMcClatchy-Tribune Regional News

May 14, 2010--Several hotel chains in India are back to raising room rents after a slow of two years, mainly as corporate clients increase spending again on travel.

Hotels such as Zuri Group Global, InterContinental Hotels Group Plc and Premier Inn of the UK already have or are increasing room rates in India by 10-12%. European chain Accor Hospitality said it will follow a variable, daily pricing in India.

Zuri, a mid-market brand that runs four hotels in India, signed contracts in March for its Bangalore property with firms such as Infosys Technologies Ltd, International Business Machines Corp. (IBM) and Microsoft Corp. India Pvt. Ltd, at an average room rate (ARR) of Rs5,000-9,000 a night, depending on the stay.

"Considering market conditions, we can demand a slightly higher rate now. We have increased room rates by about 10%," said Priti Chand, assistant vice-president, public relations and communication, Zuri Group Global. "Last year, many corporates had moved from five-star to four-star hotels, but they are willing to spend more again."

Economy chain Premier Inn, which charged Rs2,500 a night at its Bangalore hotel between November and April, its initial months in the city, has raised the rent to Rs3,100 a night. "It's still value for money," said Aly Shariff, managing director, Premier Inn.

Corporate groups typically account for nearly 70% of the hospitality business in India. With companies expanding travel budgets, bringing in expat employees and raising salaries as business improves in a reviving economy, analysts expect corporate clients to boost hotel occupancy rates in 2010-11 after they fell below 50% last year.

T.V. Mohandas Pai, director and head of human resources at Infosys, India's second biggest software exporter, said the firm has increased its travel budget this year. "Business is more, so travel is more," said Pai, though he didn't say by how much the budget has been increased.

IBM and Microsoft didn't respond to emails sent on Monday.

Several chains had announced hotel projects couple of years ago on land bought at steep rates, but many of these had to be shelved during the downturn.

Hotel room rates in India, which were among the highest globally till early 2008, crashed by 25-30% in the last quarter of 2008, HVS Hospitality Services, or HVS, an advisory body, says in its recent India Hotel Valuation report for 2010.

HVS says India's hospitality sector has so far been dependent on the 5.5 million international travellers who visit the country every year, ignoring domestic clientele. But that could change now.

"Pre-2008, annual rise in ARRs in cities such as Bangalore, which is largely driven by expats, and Mumbai would be as high as 20%, much higher than in the West," said Kaustuv Vardharajan, executive director, HVS.

Hotels will likely increase rates by mid-2010 even if clients are negotiating hard to lower the tariff, he added.

Because of the pressure by corporate clients to sustain prices even at luxury hotels, and boosted by the improving occupancy rates between January and March, there's also a rush to launch economy hotels in the big cities.

Chains such as Marriott International Inc., InterContinental and Accor, for instance, are launching economy rather than premium hotels.

So clients who would pay Rs12,000 a night at the The Leela in Mumbai now have the option to stay at Marriott's new property in Juhu, Courtyard, for Rs6,000 a night or at Holiday Inn in Mumbai at a similar price, said Vardharajan.

"Suddenly, there are lots of new hotels coming up and clients now want more value-added deals like free spa treatments or airport transfers," said Vincent Hoogewijs, general manager, Four Seasons Hotels and Resorts, Mumbai.

The luxury hotel chain is not opening a budget hotel but its increased rates will not be at their earlier highs either. The hotel chain had opened in Mumbai in December 2008 at Rs15,000 a night for its superior room, and dropped its rate later to Rs11,500. It has raised the rent now to Rs13,500 a night.

Holiday Inn will price rents at its new hotels in India at a slight premium to its competitors but only after it gains some market share.

"Most of our hotels see an opportunity to grow prices towards the end of 2010, although the increases will be nowhere as aggressive as they were in the past," said Shaun Langdon, regional general manager, India, InterContinental Hotels.


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