With Room To Spare

Just last month vice-chairman and MD of eih Ltd,formerly East India Hotels,P.R.S. Oberoi was telling his board of directors how political instability had hampered economic revival and caused a setback to business travel. Little did he know of the trouble brewing in Kargil then.

Already reeling under low occupancy rates and fierce competition from Asian neighbours offering low-priced packages, and barely recovered from the after-effects of Pokhran-II, the country's hotel majors are now readying themselves to face the long-term uncertainty over Kashmir.

Says Harinder Singh, director (marketing), Hyatt Regency: 'We have had a number of cancellations from Europe,both individual business travellers and groups. We are now trying to placate such tensions by putting messages on the website about developments at Kargil.'

Retd Maj Murlidhar, secretary-general of the Indian Association of Tour Operators, is not overly worried as long as the situation is 'war-like' but if it develops further, he says, 'the tourism industry and hotels will have a problem on their hands. After all, no one wants to visit a nation at war'. Indeed, reports showed that immediately after Pokhran, overall foreign tourist arrivals to India dropped by more than 50 per cent and in the case of Japanese tourists,whose interest in India had been revived because of the development of the 800-km Buddhist circuit,slumped by 75 per cent.

All-round criticism had accompanied New Delhi's tests, but when Islamabad followed, foreigners planning an India visit went into a panic as they feared war between the neighbours. 'We had then blamed the foreign media for creating an impression that India and Pakistan were preparing for war...but now it's proving to be correct,' Murlidhar told Outlook, adding: 'We were slowly developing the Leh sector as a solid base for tourists inclined to Buddhist culture...but I wonder if they'll be keen to go now.'

Hoteliers agree the conflict at Kargil couldn't have come at worse time, especially as the bjp-led coalition, in consultation with the tourism industry, had constituted an apex council comprising both tour operators and representatives of the hotel industry last year and serious efforts were on to start the Explore India campaign for 1999-2000.

'But any campaign now would be counter-productive,' Deepti Bhagat, vice president, itdc, told Outlook. 'Most five-star hotels in India are doing poor business and operating on a 35-40 per cent occupancy basis, some even less. We've drawn global flak for Pokhran, the economy hasn't improved for the last two years and now we have Kargil.'

Bhagat should know. Escalating operating costs and low occupancy have caused fall in profits of almost all major hotels in India. While profits at the Oberoi group dwindled to Rs 96.4 crore (for '98-99 from Rs 123.25 crore in the previous year), the figure for the Taj group stood at Rs 137.96 during '97-98 as compared to Rs 146.88 crore in the previous year. itdc's profits also dwindled to Rs 43 crore for '97-98 as compared to Rs 56 crore in '96-97, while profits at itc Hotels fell to Rs 120.97 crore in '98-99 as compared to Rs 130.37 crore the previous year.

'The world was about to forget Pokhran when you had Kargil. And look at the mind-boggling packages countries like Thailand and Malaysia are offering. Due to the crisis in the East Asian countries, their tourism policies have been reworked while the depreciation of their currencies has made these countries attractive destinations,' says a senior manager at Sita Travels.

Says Shona Adhikari, spokesperson for itc Hotels: 'Foreign tourists are anyway not coming in hordes and we haven't been getting bigtime business delegations for long. As for the fighting, we've had no bookings for our houseboats in Srinagar for the last couple of days, which is distressing. We'd developed tourism in the Kashmir valley after a long time.'

Citing Sri Lanka's example, a spokesperson for India Hotels that runs the Taj chain, feels it takes a lot of time and effort to change peoples' perception about a particular nation. 'Look at Sri Lanka,' he says. 'Today,thanks to some classy advertising across the world, tourism is booming there. But till recently, there was this perception among many travellers that visiting Sri Lanka would mean embarking on a suicide mission.'

Industry analysts agree. Unlike other countries where the government and hotel chains jointly plan promos, leading hotel chains in India have traditionally relied on their links abroad to promote themselves. To a large extent, the hotels had managed to put the Pokhran issue in the backyard. But Kargil has thrown a spanner in their plans. Yet again.