It’s off-season, but with demand strong, Mumbai hotels just won’t offer discounts

Hotels operating in the four-star and five-star categories in Mumbai appear to be holding on to their room rates, despite being in the off-season phase of business. The period between May and September generally being a low, hotels traditionally tend to lower rates to beef up business. However, with business yet to reach the peak of 2007-08 levels, hoteliers are playing it safe by not discounting too much, thereby avoiding volatility in business.

Sunil Bhatia, director, sales and marketing, The Mirador Hotel in North Mumbai, said, “Rooms rates are quite stable now as all the correction (if at all any) has already happened during April and May. Currently, hotels are focusing more on maintaining the existing levels of business. The reason being there is enough demand in the market for hotels to operate at a fairly sustainable level. In fact, there are times when demand tends to be almost 1.5 times of the hotel’s room inventory.” A four-star business hotel in Andheri East, The Mirador currently quotes an average room rate (ARR) of over Rs5,500 on a an occupancy of over 70%.

An attempt to make reservations across various hotels in Mumbai for different dates in June and July showed that the room rates quoted were the same for both months.

Except in case of advance bookings (15 days before the actual date of stay) some hotels offered a discounted rate on their current best available rate for the day. For instance, price quoted for room reservation at Trident Bandra Kurla for second week of July was Rs8,000 plus taxes, while the best available rate, including breakfast, was Rs10,000 plus taxes and a room only rate was Rs9,500 plus taxes.

Similarly, The Leela Kempinski Mumbai offered a discounted rate of Rs10,500 plus taxes (from Rs11,500 plus taxes) for room reservations in June and July. The price quoted for a base category room at their Chanakyapuri hotel was Rs15,023, including taxes and breakfast, for June and July.

The approach adopted by various hotels shows that the business environment hasn’t really changed much. However, there have been changes in the booking pattern and lead time, wherein bookings are very unpredictable.

“I had 20 unoccupied guestrooms during one of the days last week. Suddenly by afternoon we received a booking for all. The flow of bookings tends to be slow over weekends and is higher on other days, which is natural for a market like Mumbai. What is really happening is that buyers are shopping very intelligently and are booking rooms on a need-to-book basis. Besides, reservations are coming in volumes so business is certainly there. The only area where hotels are compromising on room rates is for large volumes and long-stay guests. Even for these customers, the discounts do not exceed more than 10%,” said a senior official from a leading five-star hotel in Mumbai.

While there is overall growth in the city of Mumbai, hotels in North Mumbai appear to have benefited the most. The occupancy and ARRs scenario in South Mumbai hotels is pegged in the 55-60% range and Rs8,500-9,000 range, respectively. Hotels like the Taj Palace wing and The Oberoi are estimated to be on the higher side i.e. over Rs15,000 in terms of room rates, though occupancies may not be as strong. Hotels in North Mumbai, however, are fairly neck-to-neck in terms of room rates, while occupancies are higher at 65% plus.

“Some of the big corporates like Hindustan Uniliever have relocated themselves in North Mumbai area as a result South Mumbai hotels are busy identifying replacement business for their respective properties. While business traffic had come down, conferences, training, weddings, etc are to some extent filling in the gap at present,” said the general manager of a five-star property in South Mumbai.

On the current business scenario in other key markets in the country, industry experts believe cities like Pune, Delhi and, in the coming months, Chennai will see pressure on room rates and occupancy.

PR Srinivas, industry lead - travel, hospitalty and leisure, Deloitte Touche Tohmatsu India Pvt Ltd, said, “While Pune continues to feel the heat of oversupply, Delhi is starting to witness the same with The Leela Palace at Chanakyapuri and a few other hotels that have opened and a few others scheduled to open in the coming months. I see a similar situation in Chennai as ITC will open its new hotel with over 500 rooms followed by The Leela and JW Marriot hotels. Together these hotels will add over 1,000 keys to the Chennai hospitality market leading to pressure on room rates and occupancy levels.”

Pratima Badhwar, director of sales, Courtyard by Marriott, Gurgaon, said while there is pressure in the Delhi hospitality market, the scenario in Gurgaon is much better. “Demand is fairly buoyant in Gurgaon and hotels here weren’t struggling much to fill rooms. We are doing 70% occupancy as against 62% last year.

While there has been a minor correction, the rates currently being quoted in Gurgaon hotels are between Rs7,000 to Rs9,500,” said Badhwar.

And more supply will be added to the Gurgaon market in the coming months. Accor will open its Pullman hotel while Hilton will launch its Double Tree brand. A Vivanta by Taj hotel is also expected.