Hotel Industry Suffers Major Slump Post Attacks

December 22, 2008	(Be the first to rate this story!)  Loading ...
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The Mumbai attacks targeted two of India’s iconic hotels, the Taj and the Oberoi, where terrorists shot and killed guests indiscriminately and held hundreds hostage for nearly 60 hours. This has proved a deadly blow to an industry already wounded by the worldwide economic downturn. Big hotels across the country have had to invest in beefed-up security, including metal detectors and baggage scanners, and Ratan Tata, chairperson of Tata Sons which owns the Taj group of hotels, has announced that the group will undertake its own anti-terror and security arrangements. But, as P.R.S. Oberoi, chairperson of The Oberoi Group, pointed out at a press conference in Mumbai days after the terrorists’ siege was over, “Unfortunately, hospitality and security don’t go well together.” Anxious guests are choosing to stay away, and industry associations say room occupancy in the large cities is down to 60% occupancy, even as room rates are being pared down by as much as 25%. According to event managers in Mumbai and New Delhi, many Christmas and New Year’s bashes at leading hotels have either been cancelled or scaled down. “We’ve seen 30% to 40% cancellations for New Year’s eve in our Goa property,” says Anjali M. Chatterjee of Bharat Hotels, who run the Lalit Goa Resort, “Usually there’s a spike in bookings for December 23 onwards, but at the moment, things are pretty flat.”

India has been trying to build toward 10 million foreign tourist visits in 2010, the year New Delhi hosts the Commonwealth Games. It is an ambitious goal: this year’s statistic is just about half that. The ‘Incredible India’ campaign, launched in 2002, has spent millions of dollar advertising India as a land of great diversity, offering beaches and ski slopes, teeming with man-made and natural wonders. Last year foreign tourists spent over $10 billion in the country. But since last month’s attacks, in which foreigners were among the more than 180 people killed, about a dozen countries have issued negative travel advisories on India. Bookings by foreign travelers, particularly from Europe and the U.S., are down by 40% to 60%, according to the Federation of Hotels and Restaurants Association of India. “The entire tourist season of 2008-09 is totally ruined,” says FHRAI secretary-general Harish Sud, “We’re expecting a 25% fall in the number of tourists. Large-scale layoffs loom on the horizon.”

This is dire news for the tourism industry which employs 53 million people directly or indirectly. It is also a complete about-face for the hotels sector which was enjoying positive forecasts until just months back. In the last few years, while the economy was projected to grow at 8% to 9%, top names in hospitality like Four Seasons and Aman were making forays into India to fill the huge supply gap in the top-end executive and leisure travel segments. Five-star room rates in key cities had grown by 40% year-on-year in 2007, and a report by Jones Lang LaSalle Hotels, the hotel investment and advisory service provider, had predicted India would need to add 150,000 new rooms in the next four years to keep up with demand. Now, much like other formerly glowing sectors like retail and real estate, things are rapidly rolling downhill. “Things will slow down primarily due to three reasons,” says Sudeep Jain of Jones Lang LaSalle Meghraj, “Due to the economic slowdown, demand has already dipped. The terror attacks led to bookings being cancelled. And due to the credit crunch, fewer deals will be struck so fewer people will be traveling.” Effects of the slowdown have led to less extravagance and a more severe emphasis on economy. “Earlier, the sky was the limit, but now people are holding smaller events with fewer guests,” says Sneha Tejwani, who runs the event-planning firm Occasionz Unlimited in Mumbai. “No Bollywood stars performing at over-the-top bashes this time. Business is down to a third of what it was.” Even flower suppliers in Bangalore, India’s floriculture center, are reportedly withering due to decreased demand for flowers for decorating weddings and other events.

News Published Under:   Hotel Industry in India |

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