Date:16/04/2006 URL: http://www.thehindubusinessline.com/2006/04/16/stories/2006041602980100.htm

Back Railway budget hotels process kicks off

Mamuni Das

Bidders can fix tariff levels

Fee structure
The fixed fee, which is the ground rental, varies from site to site. The hotelier will be required to pay seven per cent higher rental every subsequent year. Interested parties would have to bid on the revenue share part for the entire 30-year period.

New Delhi , April 15

The Railways' budget hotel operations process has kicked off with over 60 parties buying request for proposal (RFP) forms till date from the Indian Railways Catering and Tourism Corporation (IRCTC), the Railways catering and tourism unit, for five sites at Chandigarh, Sealdah, Vijayawada, Secundarabad and Madurai.

The RFP sale started in early-April. Operators who bid for the build-operate-transfer arrangement of the hotels, are required to pay a mix of fixed component and variable component (in the form of revenue share) each year to the IRCTC, which is the nodal agency for the process.

The fixed fee, which is the ground rental, varies from site to site. The hotelier will be required to pay seven per cent higher rental every subsequent year. Interested parties would have to bid on the revenue share part for the entire 30-year period. "Operators have to indicate monetary value that they would share (with IRCTC) by projecting annual revenues and the percentage of revenue share," said the IRCTC Director (Tourism and Marketing) Mr Rakesh Saksena. For subsequent years, parties are free to quote equal or higher monetary value and revenue share percentage, but cannot quote lower amounts in either criteria.

Tariff levels

Hoteliers are free to quote a higher revenue and lower percentage share and vice versa. But, IRCTC would consider the ultimate monetary value.

Bidders can fix the tariff levels for the hotel's services. "Railways wanted to let the market forces operate and did not want to play regulator," said Mr Saksena. The eligibility criteria for bidders include owning and operating a hotel, with a minimum turnover of Rs 5 crore, for at least five years. IRCTC has been holding interactive meetings with prospective operators across cities.