It is a buyer’s market today. Hotels are open to negotiation. Alan D’Mello gets you the best deal

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No reminder is needed to realise that your travel budget gets you further today than it has gone for a long, long time. The open market system has finally arrived in Indian hospitality, it is a buyer’s market out there and in a land where bargaining is de rigueur, it is but expected for each one to have his own ‘perfected technique’ for getting the best deals.

Negotiations are about getting the upper hand, thus acquiring knowledge is a key weapon. If you have not, it is about time you hone it into an art. Know the view from across the fence. The market is on a yo-yo, the competition has gotten more fierce.

Therefore, with room nights becoming as volatile a product as a share price, selling practices of hotel sales teams are slowly changing to resemble the aggressive characteristics of the stock broker. To a hotelier, today’s market is simply brutal. Given increased competition and the ebb in the flow of visitors into India, the hotel knows that if it does not close the sale, not only will the room go to waste, business will go to a competing hotel. So it bends backwards and closes the deal at any cost. The hotelier’s back, of late, has been to the wall except during the just concluded winter season which saw the majority of hotels run at capacity. If you fear that with such a performance, room rates will climb again, not to worry, they were low and realistic. You got your way.

It is also important to know your place in the scheme of things. Why? Because the increasing competition, while being more acute in the larger metros such as Mumbai and New Delhi, also exists in the smaller towns. There, as in the metros, preserving one’s existing client base against attacks from new players is of prime importance. You win again!

Time And Place, It’s Subjective
To be effective, it is important to know when and where to negotiate. For metros which service a large range of industries, end-October to mid-February is once again season, but will continue to remain the only season for some time to come. This because their main source market is the international inbound traveller who for some reason prefers India in the winter months.

Winter fluctuations do not apply to smaller town hotels as they are more dependent on domestic movement. However, keep in mind that hotels in such places have a restricted source market. Your room availability will be directly related to the fortunes of those industries. For a FIT (Free Individual Traveller) as well as a small group booking, the room tariff payable is extremely subjective.

The Air Show in Bangalore a few months ago is an excellent example. Try as one did, hotels refused to take a booking even a fortnight prior to the event, because they were at minus 40 (‘minus’ indicates bookings in excess of available capacity, ‘plus’ indicates bookings below available capacity). Even ‘Out Of Order’ (OOO) rooms were not available.

During these times, the tables turn in favour of the hotel. The only way to get a discount would be if you had a year-round corporate account. But then there would not be the need to negotiate!

Negotiating a resort rate works on the same principle.

New Hotel
Interestingly, the age of the hotel makes a difference for a limited period only. It goes both ways. The newer hotels know they have an edge here over their older counterparts primarily due to the novelty factor and the management is exploiting this to the maximum. Mumbai is an excellent example of the ‘introductory offer’. The spanking new Hyatt Regency at the international airport offered its introductory rates straight at Rs 5,000. This was in December, an excellent rate considering the time. A new hotel can also mean one that has just changed its branding, a trend new in India. Seasoned travellers to the US and some parts of Europe will vouch for the fact that hotels (which are basically managed on behalf of the property owner) change brandings all too often. With more and more international hotel companies coming into the country, rebranding will be a more common affair. Look out for a rebranded hotel, as it is akin to a new hotel and in many aspects follows the same path.

There is however a darker side to it. New hotels are not exactly new. It takes a hotel anywhere between five to seven years to get working from the time the first plans are discussed. In India, the high cost of capital of the mid-90s and other pressures such as a slow 2000 market means that most new hotels today were invariably delayed. Such spiralling costs of new hotels compels the reservation manager to play soft ball in negotiations in order to sell his rooms.

Most older properties are free from such burden but the cost of maintaining an empty hotel compels them to keep the negotiation door always open.

No Negotiation Zone
The small city ‘economy’ hotels and the two-star and below hotels are virtually a no negotiation zone for the FIT. They work on truly slim margins, which is why their rates are in the Rs 1,000 area. Only a really hard up company would open a negotiation here. Perhaps the only time such properties will entertain a price discussion is at the promise of a bulk or year-round deal.

Dollar-Rupee
Going against regulations, top-end hotels continue to offer dual tariffs, ie. dollar and rupee rates. Forecasting the rupee fluctuation, these hotels maintain their dollar rates higher than its rupee counterpart. Hotels have no compulsions on how they get paid, yet they often state that a foreign guest pay the dollar rate. Reservations also quote dollar rates during inquiries to sound better because the dollar rates are usually in three figures (and also for tax sops on foreign exchange), whereas INR is always in the thousands. See through this screen. As far as possible always negotiate in INR and also note that it may be a good idea to pay for your international visitors in INR.

Farewell HET
HET is Hotel Expenditure Tax, a 10 per cent levy by the Centre on rooms above the Rs 3,000 mark for hotels upwards of the three-star category. Finance Minister Jaswant Singh has permanently abolished HET from June 1 this year. So, are your rooms going to be cheaper? Yes and no. Yes, because hotels do not want to further antagonise the customer. Also because transferring the discount to you is a marketing opportunity from heaven.

No, because in some hotels, the rates are AI (all inclusive) and thus not mentioned on the bill (as is mandatory). Retaining the 10 per cent will help bottomlines. Make sure to ask about HET during your next visit.

Conclusion
The dynamics of selling a simple hotel room today has changed. The sales pitch swings between the product and price, at one time a room is a total experience, backed by the hotel’s entire infrastructure, at another it is just a commodity whose price is being bargained.

Even in a tough market, with rooms often being sold at half price as compared to two years ago, hotel rooms are still profitable. This because on a national average, the break even point for a five-star room is around Rs 2,500. Therefore today, the sale of a hotel room, is actually a sheer exercise in discounting, as some would like to term it, though it might hurt some others to say it. Whatever the options may be, it all still boils down to the relationship shared between the client and the sales executive, not necessarily the hotel. That will be the key to negotiating your room rate, no matter how stiff the tariff is.