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Guest Post | Alex Koshy: Lowest selling price – survival standard for the hotel industry


Alex Koshy, Vice President, Ummed Hotels India in this introspective article suggests that hard times are also the best times to do a self-evaluation.

These days, pricing seems to be something that most hoteliers are struggling to get right. This struggle is quite obviously taking its toll on most of us in our face-off with the global pandemic, as it continues to spread a cloud of uncertainty over all of us, even as we try to hold ourselves up with all the familiar rules that used to work so well, just a few years ago.

Alex Koshy, Vice President
Ummed Hotels India
Alex Koshy Vice President, Ummed Hotels India

They say that hard times are also the best times to do a self-evaluation. An honest evaluation of the decisions we have made in the past as hoteliers which could be contributing to worsening the current situation in several ways. Now is the time to ask aloud, is the situation that we are in as an industry, at least in part, a consequence of practices that we have followed in the past?

For example, in pre-Covid times, hotels and restaurants have been opening all over the place in the most unrestrained fashion. In fact, it can be safely assumed that the hotel and restaurant business is where the most spontaneous of business decisions and on-the-spot investments are made.

It was almost a trend that, anyone who appreciated food thought of himself as a connoisseur and therefore qualified enough to open, and operate, a restaurant. Any builder or developer seemed at liberty to consider themselves as a hotelier and presume they could build hotels the way they want, where they want, and still make a success of it.

The fact of the matter is, you will hardly see someone entering another industry with such abandon and lack of preparation. Of course, this may have a lot to do with the façade of luxury and the effortless seamlessness with which hotels appear to operate to most of the outside world.

At least some people seem to believe that there is viability in building fancy hotels to primarily serve as their own private meeting space and entertainment hubs. Not surprisingly, these are the very hotels that lead the race when it comes to reducing rates as the first step to tide over a crisis, which unfortunately can drag the hotel industry to even deeper trouble in times like these.

Irrespective of how we reached where we are at the moment, to overcome this critical juncture, plenty of introspection and concerted action is required; so is generous support from the government and financial institutions.

The need is felt now more than ever, that the government recognizes the hotel industry as one that provides employment to millions of people in addition to contributing billions to the exchequer. Many industry bodies and experts have put forward recommendations concerning GST, interest rates, restructuring of loans, subsidies etc.

The feasibility of these recommendations and suggestions will have to be thoroughly analyzed by the government and on this occasion with a lot of compassion and consideration as well. Time is running out and any decision made will have to happen quickly, in order to apply brakes on this downslide.

So, assuming that the government and financial institutions give a favorable response, will that be enough to put us on the right course?

Further challenges ahead

The biggest challenge for our industry will still remain managing OTAs and the food aggregators. In the desperation to create cash flow, hoteliers are forced to provide a high percentage of discount and commission without pausing to think about the long-term consequences and the actual flow through to the bottom line.

The pandemic has shown how super-luxury hotels are ready to sell at 4-star rates! Well, this is the time when hoteliers need to come together and set the lowest rate, below which a consumer cannot access any hotel in the city.

Unfortunately, the owner or the management company is not in a position to think over and reach a strategy because of how cash-strapped they are, especially with the commitments to their respective financial institutions.

Therefore, the government needs to intervene quickly before the hotel and restaurant industry itself gets derailed and the light at the end of the tunnel actually turns out to be the headlight of the train!

One way to do this would be to introduce the concept of the lowest selling price, which can be agreed upon by hoteliers depending on the Star category and in accordance with the dynamics of their respective cities (agreed, this isn’t going to be fun or easy, but we need to start somewhere).

Once the lowest selling price is agreed upon, the dynamics of location, services offered, design, value, human capital – the actual defining indices of hospitality – will be the deciding factors that take it forward. Rather than shunting the above as a no-go zone, we need to see if it can help us overcome the abnormal rate anomalies and loosen the current stranglehold of the OTAs.

Time for cooperative business ethics

Every single gas station in town sells at a similar price, the customer base is developed based on location and additional services offered. Ours probably is one of the very few business entities which does not practice this concept. (In saying this, I am focusing outside of the all-important loyalty factor that determines hotel choices.) So, for achieving the above plan, there should be more camaraderie and liaison among hoteliers in a city so that they support each other and work together for their overall betterment and growth.

I hope that the government and regulatory authorities will soon recognize our industry for its true worth and value, and acknowledge our pressing need for immediate support. Meanwhile, let us join hands together and prove that our industry will survive, irrespective and that the light at the end of the tunnel is really the new dawn that we are all hoping for!

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