Ashok Hotel in New Delhi, a classified five-star deluxe, plans to spend Rs100 crore on renovation in an effort to compete with private luxury hotels, but, the hotel’s general manager Vinod Sharma said, it wouldn’t be enough. He did not say how much money it would take to bring the hotel up on par with international standards for a luxury hotel.
The hotel is owned by the India Tourism Development Corp. (ITDC), in which the government holds a stake of around 90%. The transformation of ITDC from a loss-making to a profit-making company has been touted by the government, but Sharma said not enough has been done for the public sector company’s hotel business to allow it to compete effectively with the private sector. He said ITDC’s hotels should either be allotted more money or be allowed to raise debt in the private sector for upgrades in order to compete. Senior ITDC officials could not be reached for comment.
When the Ashok opened in 1956, ITC Ltd, one of the largest players in today’s Indian hospitality industry, had no hotels. Until the 1970s, the hotel was making its own soda and tonic water, Sharma said.
But state-run enterprises now compete with private players. Visiting business travellers can stay, and choose from several soda brands, including imported ones, at upscale hotels such as the ITC Maurya Sheraton and Towers, also rated five-star deluxe.
Even public-sector employees are not required to stay at the primarily government-owned hotel when they visit New Delhi, said Sharma.
The Ashok plans to spend the Rs100 crore primarily on refurbishing three floors by installing new furniture and features such as electronic door locks. The renovation, which will be completed by the middle of 2008, will be the hotel’s first since 1998, although it spends Rs2 crore a year on day-to-day fixing, according to Sharma.
The renovation could help the Ashok increase room rates, which range from Rs9,000 to Rs75,000 (for the presidential suite). Rates at the Maurya range from Rs16,000 to Rs1,25,000. Both these ranges are based on rack rates.
The Ashok will soon face more competition in hosting conferences, with the Delhi Development Authority currently auctioning a site for a convention centre in Dwarka. About 20-25% of the hotel’s revenues come from conferences, said Sharma.
The Ashok’s revenues were up (about 36%) to approximately Rs125 crore in 2006-07 compared with the previous year, he said, and profits were up about 60% to Rs48 crore in 2006-07, he added.
However, even with its impressive numbers, the Ashok has to gear up for competition with the 2010 Commonwealth Games coing up. Renovation would be one way.
ITDC has eight hotels in its Ashok Group of Hotels, but the New Delhi Ashok is the only one with an Indian “five-star deluxe” rating, said Sharma. ITDC also has six fully operational joint venture hotels, one hotel in Bharatpur, duty-free shops, and other tourism-related businesses, according to a tourism ministry report.
Some industry analysts think the government should get out of the hotel trade.
“They have no business spending this kind of money,” said Manav Thadani, managing director of the India unit of hospitality consulting firm HVS International. Rather than investing in the hotel, the government should privatize it or give it to a management firm, he added.
