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C. Raja Rajeshwari

THE industry is moving towards new revenue sources in an effort to have greater stability.

The traditional method of hotel business entirely depended on room and the associated food and beverages revenues. Being a cyclical industry, the companies have good business during October-March, thanks to the inflow of foreign tourists. Business travellers, though, are a source of revenue through the year.

Post 9/11, when there was a drop in tourists and business travellers, the revenues of hotels suffered. In its aftermath, the focus has been on cutting down the problems of cyclicality, which is inherent to the business. The overall approach is to move towards a more balanced revenue stream. Towards this end, some interesting concepts have emerged. They are:

Management contracts

Hotel companies have taken management contracts in the past, but they accounted only for a small percentage of revenue. Setting up a hotel involves huge capital outlay and the gestation period can be 48-50 months for a 250-room 5-star hotel.

A management contract overcomes these drawbacks. For companies with a pedigree, such as EIH and Indian Hotels, these contracts generate revenue as fixed fees and a chunk of the profits too.

Real-estate developments

The metros, being the hub of business activity, are the most profitable for any hotelier.

With increasing demand for long-stay rooms (rooms that are occupied for more than two months), a different strategy is being adopted. Hotel companies are moving into building and managing serviced apartments — a hybrid between rental apartments and hotels.

This primarily caters to the short-to-medium term stay of international business travellers and NRIs. Mixed-use real-estate developments have both serviced apartments and retail units in the same outfit. This is to have more than one revenue-generating component in the same development.

The falling real-estate costs have fuelled this development, providing a stable source of revenue to the companies.

Spa

In places such as Rishikesh and Munnar, spas are big business. With the promotion of leisure resorts as rejuvenating destinations, there is a huge market for this concept. In metros, day spas with one-day programmes are finding market acceptance.

Banyan Tree manages Oberoi's spas. These are located in Oberoi Hotels and Resorts, at their international properties, as well as at their Indian locations.

These concepts are still at a nascent stage in India. The capital expenditure involved is substantial and the players are yet to see these making money.

These apart, medical tourism, a market estimated at Rs 1,200-1,500 crore and growing at 30 per cent, offers immense potential. Players are waking up to this opportunity, and hotels and resorts in the South, especially in Kerala and some in UP, have been cashing in on the trend.

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