Citing Inflation, Ginger Hotels to Hike Room Rates by up to 25%

Ginger Hotels, the Indian Hotels Company Ltd’s three-star budget chain, is set to raise room rates to offset the higher cost of doing business from rising inflation, said Prabhat Pani, CEO of the Roots Corporation Ltd.

Indian Hotels owns both Roots and the Taj Group of hotels.Up to now, the tariff for a single room in a Ginger Hotel has been Rs999 per night.

“Given the kind of pressure on real estate and general inflation, holding on to this kind of price would not be feasible,’’ Pani said. However, he declined to specify what the new rate would be or when it would take effect.

An operator at Ginger’s reservations call centre, responding to a telephone query from Mint, said the new rates would be “20-25% higher.’’

With India’s economy growing at 9% and inflation advancing at breakneck speed at the same time, it makes sense for Ginger Hotels to raise their rates, especially when the country faces an estimated 1,50,000 room shortage.

Tourism industry professional Himmat Anand said Ginger’s planned increase in rates makes business sense. “There’s no logical reason for Ginger to sell at Rs999 per night,” he said. “All the new people in the budget category are pricing themselves at about Rs1,500 per night,” he said.

According to a report from hospitality consulting firm HVS International, the average rate for a three-star hotel in India increased 11.7% to Rs2,044 in fiscal 2006 over a year earlier.

High revenues from hotels have spurred enormous investment, including hundreds of millions of dollars from abroad from companies such as Hilton Hotels Corporation and Accor SA.

That, coupled with higher demand for land from real-estate companies, retailers and hoteliers, has pushed up land prices, making it difficult to build budget hotels, which bring in lower revenues per room than luxury hotels. For example, Emaar-MGF Land Pvt Ltd bought two adjoining plots of about five acres on the outskirts of South Delhi for Rs388 crore, or Rs77.6 crore per acre, last year.

Ginger Hotels are geared to accommodate business travellers, pilgrimage tourists, and others looking for basic services at a low room rate in a hotel market that has a shortage of budget accommodations. The company now operates seven hotels and expects to have a total of 25 under operation by the end of fiscal 2008, said Pani.