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Friday, June 22, 2007

Hotel companies lose revenue with weakening dollar

Rising rupee boosts import of hotel equipment
A stronger rupee vis-à-vis American dollar has affected the revenue collection of hotel companies as hotels selling rooms to foreign nationals are earning less with falling dollar rates. The INR has appreciated by 9.2 per cent in 2007 and is up 15 per cent from a three-year low of 47.04 in July last year. The dollar closed at Rs 40.575 at the time of filing this report.
Abinash Manghani, head (Sales & Marketing) of ITC Fortune Hotels, says, "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 caution that such an escalation may have further bearing on foreign tourists coming to India as hotels might hike rates, making accommodation more expensive. Ram Kohli, CMD of Creative Travels & Resorts, says, "With hotel rooms selling at as high as USD 350 a room night, any additional rise in outlay will make destination India more high-priced."
Meanwhile, the rising rupee has boosted the import of foreign equipment. Sunil Khanna of Aster Technology, a supplier of foreign equipment to India, explains, "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."
Explaining lowering of import bills, Prem Subramanium, head of Infrastructure Development Finance Company (IDFC), says, "As far as hospitality equipment suppliers are concerned, Indians will find their import bills lowered. This has already had its impact on furniture and interiors as the majority of new rooms are kitted out with material from Malaysia and China." Conversely, export has been hit badly and its impact will be more apparent from July onwards.
Explaining further, Subramaniam says, "Groundhandling agents who have contracted in US dollars will have lower earnings while wholesalers who have contracted in rupees and need to use up more dollars to pay for services will suffer. Similarly, NRI/PIOs who are from dollar-earning environments will find their dollar fetching fewer rupees." He concludes, "We will continue to receive business visitors who will fill our hotels in cities but they are unlikely to extend their trip for a leisure extension or return for a leisure vacation. But fortunately we have an adequate increase in domestic tourists."

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