Hotels slash tariffs as arrivals slump

Major hotels have slashed their tariffs since December last year following slowed growth in tourist arrivals. The room rates of most five-star properties have dropped 10-15 percent while the rest are in a wait-and-watch mode.

According to hoteliers, the rate cuts have been basically prompted by a slump in arrivals from the European and Indian markets. Visitors from these two markets are big spenders for Nepali tourism.

The tariff of almost all the five-star hotels has dropped to US$ 80-90 from US$ 90-100. The decline in prices also points to fewer business-class clients. Hotel iers said that price cuts have been seen mostly at luxury hotels.

With minimal growth in tourist arrivals, hotels are witnessing a drop in their room occupancy, which in return has forced them to go for price cutting measures. “As our occupancy dropped by 20 percent since December last year, we were compelled to slash our room tariff by 15 percent,” said Bharat Joshi, resident manager at the Hotel Yak & Yeti.

Another five-star property Everest Hotel also reported a drop in occupancy rate during the mid-December - mid-January period. Although the hotel declined applying low rates, it expected recovery in February.

A source at Everest Hotel , one of the favourites among Indian travellers, said the drop in the number of Indian tourists and cancellations by Japanese travellers in January affected its business.

Amir Pradhananga, director of sales at the hotel, said they have not officially slashed the tariff, but said occupancy was hit in January. “As we are receiving healthy booking for February, we are hopeful that demand will return to normalcy,” said Pradhananga. Avik JB Singh, sales and marketing manager of Hotel Annapurna, said political instability was the major reason behind the slump that compelled the five-star properties to go for under-cutting measures.

The hotel room tariff was on upward trend for the last two years. Driven by improved tourist arrivals, five-star hotels had hiked the average room tariff by 20-30 percent in the last two years. Many of them had reported record-breaking revenue in 2011.

According to hoteliers, all market segments, including corporate movement, trekking, leisure and business, have slowed down. The major reason for the slump, according to industry watchers, was the political instability and the announcement polls in November last year.

Hotel Association of Nepal (HAN) President Shyam Sundar Lal Kakshapati said most hotels have reduced tariffs as a result of declining tourist arrivals that hit big hotels’ occupancy.

Now, the industry is keenly watching whether things will change from mid-February when the new travel season begins. “It’s a market economy,” Joshi said, hotel tariffs rise with the increase in travel demand. Normally, mid-December - mid-February period is considered off season. “But what we fear now is tourists’ diversion to Thailand and Malaysia due to Nepal’s political crisis,” said Joshi.  

Although the under-cutting trend has not become much visible, but if the current arrival trend continues, many of the hotels will apply low summer rates due to the demand-supply mismatch, Kakshapati said. “However, the cost-cutting war among hotels that affected the business in past years will not re-surface.” According to Kakshapati, although the travel demand from China has picked up, Nepal’s charm on Indian travellers has slowed lately. “We need to concentrate the promotional activities on two neighbours — India and China — until Europe recovers from the debt crisis.”

As the Asian markets are price conscious, there is no alternative to cutting tariff rates, Singh said. “Annapurna is not an exception, but instead of cutting tariff we are providing value added services to the customers.”

According to hoteliers, the number of Indian, Spanish, German, Japanese visitors has declined significantly with the start of 2013, but the number of Chinese, Americans and British visitors is stable. Given the current scenario, star hotels have projected 2013 a modest year after witnessing healthy business in 2011 and 2012.

source: The Kathmandu Post,26 Jan 2013