In Focus

Dollar down$tream

For months now the Indian rupee has been appreciating strongly against the US dollar and if this continues, the Indian travel and tourism industry will definitely have to change its game plan and perhaps stick to a single currency for transactions. By Chetan Kapoor

The nation's GDP has been growing at over eight per cent on an average since 2004 and is expected to touch the nine per cent mark in the coming years. Presently, the travel and tourism industry contributes about 5.8 per cent to the Indian GDP. In this bargain, the Indian rupee has appreciated strongly against the US dollar. On an average, the rupee-dollar exchange rate has been hovering close to Rs 39 instead of the once-upon-a-time-value of Rs 44 - an appreciation of close to 14 per cent in the last year.

Taking the industry into perspective, this appreciation has resulted in the outbound traveller now getting more for every dollar. On the other hand, it is getting more expensive for inbound traveller. According to Madhavan Menon, managing director of Thomas Cook, "The rupee appreciation has not helped in case of inbound tourists as they are getting fewer rupees for every dollar they spend, while the Euros and Sterling has remained stable. If the rupee continues to fluctuate at 11-12 per cent per annum we are likely to have a big problem. Nothing is getting cheaper and hotel rates are going up. It is a double whammy."

The travel agent has had to face the brunt too. Says Hutokshi Marker, COO of Trail Blazers India, "The appreciation did affect the trade initially as we did not realise the buffer needed and with the fluctuating rupee-dollar exchange rates, bank charges had to be taken into perspective and also margins were to be marked up so as to avoid losses." Interestingly, the rupee appreciation has caused a lot of reshuffling in the hospitality industry since it hurts inbound business the most.

Going solo

In June 2007, Abinash Manghani, head (Sales & Marketing) of ITC Fortune Hotels had said, "There is a loss in earnings with more foreign guests as dollar exchange rate has come down in comparison to the Indian rupee." However, industry experts cautioned that such an escalation would have further bearing on foreign tourists coming to India as hotels might hike rates.

Predictions like these made the industry accept the Indian rupee for all transactions. Sanjay Sethi, CEO and managing director, Berggruen Hotels, says, "Single tariff is here to stay. Most hotel chains are switching to single currency tariff structure from dual tariff. I think that the trend will continue and more and more hotel chains will go for single tariff."

However, some hoteliers are of the opinion that this appreciation won't necessarily affect them. Anant N Joshi, regional director, Marriott Hotels International, says, "I reckon that rupee appreciation will not have as much impact on the hotel industry as other industries. Due to the boom in the industry, occupancy rates are rising and therefore hotels have the liberty to increase the tariffs and thereby offset the impact of the rising rupee."

To this, Joe Rajan, CEO of Harvey India, a tour operator, says, "The big international hotel chains have stopped taking dollars for restaurant bills which puts the inbound tourist in a spot if they are not carrying a credit card. However, when the season looks good I am sure hotels would definitely want to make money but at the same time, hotels in India are getting a lot expensive and in spite of that, one can find more leisure travellers as compared to the previous years."

Most five-star chains like Le Meridien, Taj group and ITC Maurya have recently gone for a single tariff structure.

• Le Meridien is charging Rs 17,000 per night for a single room now as compared to Rs 12,000 for Indians and US$ 300 for foreigners previously. (Double bedroom - Rs 18,000 per night against Rs 14,000 for Indians and US$ 350 for foreigners earlier)
• The Taj group of hotels is charging Rs 18,000 per night for a single room now as compared to Rs 12,000 for Indians and US$ 275 for foreigners previously. (Double bedroom - Rs 19,500 per night against Rs 13,000 for Indians and US$ 300 for foreigners earlier)
• ITC group of hotels too has started following single tariff structure since September this year.

While on one hand there may be an issue of steep accommodation prices vis-à-vis international standards, the appreciated rupee has boosted the import of foreign equipment. Sunil Khanna of Aster Technology, a supplier of foreign equipment to India, explained, "We are pleased with this situation as the prices of equipment, ocean/air freight and spare parts have fallen with consequent reduction in import duty and clearance charges. This has cushioned the impact of rising stainless prices. Since the import of Food Service Equipment is a big burden due to high landed cost, a more favourable exchange parity rate is a welcome relief."

With inputs from Praveen K Singh and Dinkar Farwaha