PUDUCHERRY: A significant decline in tourist influx and expenditure lately has triggered serious repercussions in the once-thriving hospitality sector in the Union Territory, with the Puducherry Hotels Association saying that nearly 119 properties have put up a “for sale” sign. Stiff competition from prominent hotel chains, proliferation of unlicensed homestays and street food vendors have worsened the financial predicaments of the businesses already striving to stay afloat.
“Hotel occupancy has fallen sharply, affecting mid-range hotels that are unable to compete and are now shutting down,” said Anand Gandhiraj, secretary of Hotel Association of Pondicherry, affiliated to the Southern India Hotels and Restaurants Association. “Occupancy rates, which previously averaged between 65% and 75% annually, have now dropped to 40-55%. The situation is compounded by the upcoming addition of 2,000 new rooms in a year, to the existing 3,000-room inventory,” he said.
Also, the dwindling tourist inflow has led to a trend that has pushed the businesses to stay put for a few high-demand days to support the whole year. Gandhiraj said, “Demand exceeds supply only during a few days in a year. People are investing based on these few high-demand days. Big hotel chains like Radisson and Accord leverage national marketing to attract visitors. Local hotels like Athithi, Sunway or Annamalai and the budget ones cannot match their scale.”
The shrinking spending power and layoffs in the IT sector due to AI integration have affected the visits by tourists, who are overloaded with choice with new hotels having sprung up along the ECR in Tamil Nadu and Auroville.
Exacerbating the burden are the unlicensed homestays that have been operating without paying commercial tariff or licence fee, thus offering prices far lower than that of the licensed hotels. Despite repeated assurances by the government to regulate these establishments — including a recent direction from CM N Rangasamy during the budget session this year — enforcement remains lax.
Officials admit there is no concrete data on the number of unauthorised guest houses operating in the UT. Saying that around 119 properties are already up for sale, Puducherry Hotels Association vice-president Raja Ganesh told TNIE, “In this scenario, many newcomers are entering the sector, with some even converting their heritage homes into hotels, without realising the harsh market realities.”
Puducherry Restaurant Association secretary O Manoj Kumar said restaurant sales have also taken a hit, with a 30-40% drop compared to 2024.
The food business is increasingly moving towards street vendors, who sell a wide variety of fast food items at significantly lower prices. “We have to pay GST, rent, licence fee, and electricity charges at commercial rates, which the street vendors do not,” said R Rangaraj, a restaurant owner.
Stakeholders stress that while all deserve to earn a livelihood, a level playing field in pricing and taxation is essential.