"To get your rates up, you have to get your service up"
Tourist arrival numbers in the recent months have been recording impressive growth indicating that the total arrival this year is most likely to hit 500,000 as forecast in November 2006 by Soaltee Hotel Ltd. (SHL) in the company's annual report. But how has this resurgence in arrival numbers reflected in the hotel business? Anil Pathak, General Manager of Soaltee Crowne Plaza, the five-star property owned by SHL, explains in this interview:
How is the hotel business these days?
Tourism in the last six months has only been growing at a steady pace. Occupancy in Soaltee Crowne Plaza has jumped by 7-8 per cent in the last six months. It is a sizeable increase. Also the average room rate (ARR) has been growing though this growth is slower than the growth in occupancy. However, the occupancy growth across the market, which is the five-star hotels set, has been only about 2-3 per cent.
Among the major markets from where we get tourists, the Indian market continues to be very steady. Spanish and Italian markets have shown a renewed pace. These markets operate between June-July and September. The growth rate in these markets has been around 12 percent at the moment. A new trend is emerging also in the American market. It has not totally revived but some of the trekking tours that we used to have previously are coming back though there are no great numbers to be seen at the moment. It is reviving and that is good.
The major internal market for our hotel has been in food and beverage. The growth in this has been around 12 percent during the last six months. Our restaurants are doing very well and the rates have been constant and they have remained premium in the city. So, overall, the situation has been good. Even if we say the situation will be what it is today, or stabilise, I think the growth factor will be there till the end of the year. There is no doubt about it.
You said that the ARR is improving. What is the growth rate?
If you look at the market average rate, it has grown by 3 or 3.5 per cent. The market rate for a region like Kathmandu was initially 40 dollars. Now that has gone up to around 42. This is not very high. But I think once the season starts in September, most of the hotels are going to take the rates up and that's going to be a sizeable increase.
So, is the forecast that SHL had made in its annual report of November almost 500,000 or more tourists arriving this year likely hold true?
Yes, it is happening now. We are seeing a positive growth month on month.
What is the market share of Soaltee in this situation?
We measure our market share in terms of the revenue generation index which is basically a combination of occupancy and room rate. By that count, we are very clearly ahead of the competition. We are no. 1. Our competition is still lagging far behind in this index. You have to compare: if you are growing in occupancy, are you also growing in rates? The true market share of the company depends upon how much it grows in occupancy along with the growth of the average room rate. So if you combine these two figures, we are no. 1, far ahead of the competition and we are growing stronger month by month.
In this situation, what should the strategy be to increase the annual arrival number to one million tourists?
There is a simple formula. We have to first get our infrastructure in place. When we talk about infrastructure, we are frequently reminded of the number of airlines flying into Nepal. More and more airlines are planning to come in but they of course have some roadblocks. I cannot really divulge who is planning to come in because most of these airline staff stay at our hotel, but I still can say that there are a number of very positive developments in the offing for the next four to five months. There are three to four airlines wanting to come here. We need to develop the air traffic routes for the European sector. There has been an increase in flights from the Far Eastern market. After China Southern started coming in, air capacity has increased in that sector. And there are one or two other airlines willing to come in from that sector. But what we need right now is to improve our infrastructure for the European sector. Austrian Airlines is now gone. The void if created has not been filled up.
Because of the recent crisis here, people have forgotten about Nepal. Even today if you go to the tourism marts in Europe and elsewhere, you find that other destinations have taken over the place of Nepal. Getting Nepal back will not happen just by increasing the infrastructure. We need to have a brand campaign. I think that NTB did pretty well with the "Once is not enough" campaign. But I also think that we have to actually go into the market, doing more road shows, tell people with a bang why we have come back, what is so unique about us and how we compare to other destinations. This is something that we call 'direct target marketing'. This will have to be taken more seriously.
What is Soaltee's new expansion strategy?
When we recently reflected on how to make historic changes in the hotel, we tried to identify the negatives about the hotel and we found that one major negative was about the rooms. That means the rooms needed redoing. We will be completely renovating the 108 rooms shortly to bring them at par with the international brand standard of Crowne Plaza. This is the first investment we made from our revenue resources. Then of course we already have a brand new restaurant Kakori. As the next step we are going to have a good night lounge where people can actually go in, sit down, talk and have a good evening filled with entertainment. However, we are not talking about a discotheque.
We are also renovating the lobby area, the bar and the path to the lobby to enhance the guest arrival experience. We are also improving the banquet, which is our forte. We are bringing in more technology in this. In terms of technology, we will also introduce pay TV, becoming the first hotel in Nepal to provide such a facility. In short, we are upgrading the entire technology at the hotel.
How is LSG Skychef doing?
It actually contributes to a growth of around 27 per cent of our overall revenue. We have now started reviving the entire plant for it. We are not looking at airline catering alone. We are also looking into other markets like retail catering. We are also looking into institutional catering. In fact we are already in discussions with a major operator to start this line.
In airline catering, we have added China Southern and we are talking with Jet Airways.
Under institutional catering, for example, if a corporate house is having a board meeting, we can provide the service for them. Similarly, if a couple of people are going somewhere by bus, they don't need to stop anywhere in between for food. We supply them lunch boxes which they can open during the trip and get hygienic food.
Talking about the room rate, there is an allegation that the rate is not increasing because of Soaltee. What is your comment?
Soaltee has always been no. 1 also in terms of room rate. There were some market forces which I would not like to name, that really brought down the prices. We did wait and see whether the market would react to a higher rate. But it is not the case of just one hotel. When one dropped the rate, another followed suit. If you had to retain business during a crisis, you had to drop rates. But starting September, we are very clear about the rates that we are charging, because the market is bouncing back. If you say that we dropped the rate because our competition did that, let me put in on record that we waited to see whether we could continue with our rates. But the market till now is not a supplier's market. It is a customer's market. However, we can at least say that we waited to see for some time. But we had to go with the market trend even if we did not set it. If you remember, our earlier chairman even called a coalition of forces to get the rate up. But the same people who had dropped the rates did not agree to the terms and conditions and they broke the agreement. So there is no truth in saying that Soaltee brought down the market rate. It has always been trying to push it up.
In Indian cities the room rates are really high. Why are not we taking advantage of this?
I think there is no strategy here for the country. Everybody wanted to emerge fast as one of the finest hotels. The rates fell down when the market dipped because of the situation of the country. So, when it is not a seller's market, there is nothing that we can actually do. But I think in the next one or two years we should be able to get back to the level we were at before the crisis. And that's the time we need to have a broad plan not just between hotels but between travel agencies and the NTB, and have a blue-print of how we move on from there. What can we add to our services? Can we add more value to what we are actually giving right now? Should we have some refurbishment plans?
Again I say, Soaltee has been the leader in everything. When we came out of the crisis, we were the first to invest back into the hotel. The rest of the hotels are as old as we are but no one has shown a single sign of any investment back into the company. So the thing is that over a period of time, people have forgotten that to get your rates up you have to get your service up, and for that you need to invest more in your property and your people. Soaltee is a firm believer in this and that is why most of the other hotels have hired employees of Soaltee.
