Rupee slide: Tourism, hospitality sectors at peril

Published: 11th July 2013 09:03 AM  |   Last Updated: 11th July 2013 09:03 AM   |  A+A-

As the rupee continues to depreciate and markets plunge into fresh bouts of turmoil, the travel and hospitality industry, two high-value sectors which are inter-dependent, are in direct peril from the economic storm which threatens to engulf them in the coming months. However, for the moment at least, both the travel industry as well as the hospitality segment, have managed to weather the storm pretty well so far.

Saravannan, the business head of a major travel agency in Chennai, says that international and domestic booking traffic has largely remained unaffected since the rupee started its downward descent. “If you look at the current price of air tickets, they are actually higher than what they were a few weeks ago,” adds Saravannan, who says that during the months of July and August, student traffic from India to other countries ensures that there is always a demand for tickets.

However, Nidhi Deshpande, another travel agent in the city, says that the industry expects a slump in traveller outflow from the country due to the high value of the dollar and the euro. “We have not seen the worst of the consequences yet, because July is usually when you would expect a greater demand for tickets. And because of the falling rupee, traveller inflow, especially from the US is also quite high. But how the cookie will crumble in the coming months is anybody’s guess,” she said.

The fate of the hospitality sector is almost inextricably interwoven with that of the travel industry. And the first fissures caused by the crumbling Indian currency are perhaps already being witnessed in the hospitality sector.

Excepting the “tourist bubble” caused by the falling rupee, where summer travellers take advantage of the high value of their currency to visit India, Roopan Sud, director of finance, Hyatt Regency Hotel, Chennai, said that the coming months will be a stern test for the hotels specialising in high value customers.

“As a lot of our expenses go toward procuring imported commodities, the falling rupee has a direct bearing on our overhead expenses, which, if we wish to stay competitive, we cannot pass on to the traveller,” he said.

The higher price of utilities and energy has also eaten into the hotel chains’ balance books. The sheer number of the hotels and the competitive nature of the hotel industry itself has almost made it an internecine affair, whereby the higher costs cannot be passed onto the consumer, nor can guest retention strategies, such as free room upgrades, be done away with in such a highly competitive market.

“Tamil Nadu tax structure is such that, when a traveller rents out a room, he is charged tax based on price and luxury of the room. So, when we give free upgrades to improve customer retention, we have to bear those costs as well,” revealed Sud.

Even industry experts are clueless as to the repercussions the falling rupee may have on these two sectors, which are on the proverbial frontlines of the economic storm. Perhaps in what may turn into a full-blown crisis in the coming months, the best way to survive the storm may simply be to ride it out and hope it passes quickly.

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