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It is a common practice for most premium hotels to exchange
a 'business report' on occupancy and prevailing room rates of competing
hotels. They also share about banquet revenues, crew pricing and corporate
tariffs. This may seem like perfect routine but in reality may help create
a cartel that can dictate price, similar to the practice in tyre and cement
industry, avers the report.
A leading hotelier based in Mumbai admits that information
sharing among top hotel chains is quite common and based on that, the
average room rate (ARR) is adjusted. However he insists, 'There is information
sharing among us. I won't agree it is cartelisation. It's an arrangement
between the hotel groups.'
Most premium hotels deny the existence of any cartel.
While general managers may know and talk to each other, there is absolutely
no arrangement to fix room-pricing, they claim. Says VC & MD of Leela
group Vivek Nair, 'It is fiercely competitive, and it is impossible to
maintain room rates amongst hotels.' He however concedes that this practice
prevents undercutting in a fiercely competitive market and tour operators
from pitting one hotel against another.
More than 70% of the business for hotel companies is
based on contracted rates; 50% from corporates and 20% from meetings and
conferences, it works well when hotels share information on room rates
and occupancy, feel the hoteliers.
There are some who believe that it is unlikely that cartelisation
is taking place in the bigger cities, as many foreign tourists come on
referral basis. For example, Hyatt in US will recommend Hyatt Delhi to
its customers coming to India. However, in some Tier II cities, cartelisation
takes place where business volumes are low compared to bigger cities,
says an industry source.
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