The Supreme Court's decision to ban sale/serving of liquor, 500 metre from the outer edge of a national or state highway, is set to impact 25% to 30% hotels in the premium category across 12 cities in India.

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According to an assessment by Crisil Research, nearly 27% or 102 hotels out of the 384 hotels in the five-star and five-star deluxe segment stand affected and will be compelled to stop liquor sales. The major impact, Crisil said, would be encountered by cities such as Pune, Kolkata and Agra.

"Pune, Kolkata and Agra witness the highest impact at 71%, 69% and 67% hotels, respectively, being affected due to the liquor ban. Premium segment hotels in Mumbai and Goa have escaped the hit as no major state or national highway pass through premium segment hotels," Crisil said.

Hotels on the outskirts of Chennai along SH-49, SH-49A, SH-48 and SH-114 are majorly impacted. As a result of the ban, 48% premium hotels have discontinued liquor sales in their properties.

As far as National Capital Region (NCR) is concerned, hotels on NH-8 have been majorly impacted due to the ban. "Hotels located in Gurugram and near the Indira Gandhi International (IGI) airport account for nearly 50% of the premium category hotels in NCR. Around 25% premium category hotels in NCR have been impacted.

In Bengaluru, hotels situated within 500 metres of NH-44, NH-75 and SH-35 have been affected. However, since most premium hotels are situated in the city centre, hotels on the outskirts, about 17%, in the city of Bengaluru have been impacted.

Premium hotels in Hyderabad are far from the NH-65, as a result hotels here have had nearly no impact (only 4% of the total premium hotels in the city) of the ban except for a Marriott hotel situated at a distance of merely 350 metres from NH-44.

The report added that hotels within the city will now pose as a major competition to premium segment hotels on the highway. "Competition will not only be restricted to premium segment hotels but will trickle down to the four- and three-star category as well. As a result of this ban, the booking window period is also expected to shorten thus building the pressure," Crisil said in the report.

The premium segment hotels are expected to face a severe lash in food and beverage (F&B) revenues owing to the ban as liquor sale alone accounts for about 10% to 30% share of the total F&B revenue. "This forms about 5% to 15% of revenues and differs property-wise. But the impact on revenue is expected to be higher. The food segment revenues will also witness a decline as customers will prefer dining at other restaurants that serve liquor.

"The judgement is also expected to shift the meetings, incentives, conferences and exhibitions (MICE) business and weddings from the hotels situated along highways to hotels that continue to serve liquor," Crisil said adding that demand for rooms is also expected to witness an impact especially in locations that have higher MICE demand and foreign travellers.

A combination of all these factors is set to have a major impact on revenue for the hotels on the highways while also resulting in decline in profitability for the players.

While few states are in the process of de-notifying state highways to reduce the impact in cities. The MMRDA on April 12, 2017, wrote to the state public works department asking it to de-notify the western and eastern express highways (WEH & EEH) in Mumbai so that closure of 340-odd liquor shops, permit rooms and bars in Mumbai and its immediate suburbs would not be required. WEH extends up to Dahisar, while EEH goes up to Thane. Similarly, other states are also evaluating the de-notification option.

Hotels are also trying various ways to increase the actual distance one would have to traverse to reach their premise. The methods involve changing entrances, adding hardscape / landscapes to increase the distance etc. Hyderabad's Marriott hotel and convention centre, which is impacted by the ban, has re-routed their liquor business through Courtyard by Marriott (escaped the ban by just a few metres) which is a property on the opposite road interlinked by a sky-walk. This is an effective means by which the hotel has avoided dip in demand," the report said.