Article (July-2017)


Hospitality sector and Business Growth

Dr. Vinayshil Gautam

Designation : -   Internationally Acclaimed Management Expert. Chairman, DK International Foundation

Organization : -  


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Much has been made out of the hospitality trade in the last 2 years. In fact in the public discourse of our country, much which comes from the top public leadership often finds a large number of takers and followers. Praise and support comes forth spontaneously and the logic for it is many times found later. The writer recalls the mid 80's when the then Prime Minister Rajeev Gandhi hit upon the idea of 'human resources development'. Almost overnight the Ministry of Education at the Centre became the Ministry of Human Resource Development. The enterprises worked overtime to paint their signboards from department of personnel/establishment/employee welfare to the new sign of Department of Human Resources. Not everyone was clear what the distinction was between the first label and the second label.

The same is still true nearly 30 years down the line. The top leadership discovers the virtues of the hospitality sector or tourism and people rush to climb the bandwagon. There may be nothing wrong with that. However, there has to some application of mind to operationalize the clarion call into operational terms. Ideas and institutions have to be nourished. Hence, if hospitality sector or tourism is to grow beyond its natural push, there has to be facilitating circumstances. Consider the present situation. The global city's room tax rate, in percentages, in India is phenomenally high. In Hong Kong it is 0%; in India it is 28%; Bangkok and Singapore have it at 7%; Tokyo at 8.8%; New York at 14.8%. The figures speak for themselves. How does tourism grow? The writer of these lines proposed Delhi as a venue of an international body's convention. Almost a third of the executive council of the Association impatiently pointed out that a room which costs UD $125, say in Manila, costs nearly US $300 in India. The bid was lost. Sloganeering is a valid platform. Converting a slogan into operational terms requires domain knowledge and insight.  In this context it is well worth reminding that coming in of the GST would mean the following: GST will be computed on the actual room rent charged to the consumer. By compounding the situation would only get worse.

Even the not so-knowledgeable would recognize that to travel one need a place to stay. A place to stay cannot be a luxury. By the same token there is no justification to expect someone to live at lower scale of quality of life than the one to which he is used to, at his base station. Hotels could have been seen as a part of infrastructure. As of now in very large segments of financial analysis it is designated as a 'source of luxury'. The hotels will not flourish at the expected rate with an approach which could kill the hen that lays the golden eggs. Whereas it is true that there is no tax for rental below rate of Rs 1000 but a decent place to stay with some 'dignity of association' is very difficult to get below the Rs 5000 slab. Looking at the figures it is obvious that in India roughly 120000 branded hotel rooms are available. Of this it is estimated that 65% have a tariff above Rs 5000.

It is another matter that in an established hotel of 250 room's capacity, even if one stays in a room rate of Rs. 7500 per day, one would hardly get an attention if the average room rate in that Hotel is Rs. 35000 per day. Pressed, as these establishments are for personnel, they do not have even the manpower to provide basic services to rooms which are hardly remunerative. Then enter the style of self service, buffets and other cost cutting techniques, which leaves the traveler jostling with crowds and struggling for space even in the designated restaurants of such establishments. This may not be the best way of drawing high end travelers of standing, dignity and influence. The assumption that if somebody is well endowed he has money to throw, clearly does not bear scrutiny. If someone has a planned holiday of say US$3000 per day there is no reason why he should come to India when he could just as well go to Shanghai, Bali or for that matter Chicago. His dollar goes much farther in these places than for an equivalent sum spent in an equivalent property in India. This is not the best way to do business.

For hospitality sector, which is hugely patronized by the business traveler and for the tourism sector which is growing by leaps and bounds the way hotel projects and establishments are looked at, need a serious review.  It is nobody's case that powers that be, do not understand this. There are important break through which have taken place by providing for E-visa's and sprucing up tourist destinations.  Like it is globally, the Indian hospitality sector is progressively moving on to the use of analytics for segmenting guests. Their booking trends and preferences are significant inputs to promotion. Analytic practices in conjunction with applied intelligence should be a significant factor in determining room pricing. The yield quotient will automatically go up. Constant marking up of room rents is at best an unthinking and self-defeating exercise at room enhancement. What is required is customer service customization in true sense of the phrase.

The times, when any semi educated person looking for easy entry into a profession could walk into the hospitality and tourist trade, are over. The profession of hospitality sector requires a sensitive application of scientific methods, as any other. The sooner we read the writing on the wall, the better it is for lending substance to public posturing on growth of the hospitality sector.