Tamil Nadu

How hotels are cutting costs

The hike in fuel and LPG prices has added to the input costs of hoteliers, who have cut prices at the request of the government. They are now struggling to maintain their profit margins without comprising on the quality and quantity of food.

“We have brought down prices in response to the government request,” says M. Ravi, President of Tamil Nadu Hotel Association and Managing Director of the Vasantha Bhavan chain of hotels.

Hoteliers are not only confronted by higher fuel costs, but also increased costs of raw materials including staples such as rice, dhal and oil. Their wage bills are also under pressure with cooks demanding higher wages.

In response, some of the hoteliers say they are not only planning to shrink their menus but are also contemplating reducing space from 5,000 sq ft to 1,000 sq ft.

“We are thinking of cutting some items and trimming down on choices in the general menu,” says Mr. Ravi. “If this trend continues, no hotelier can survive. We are even contemplating winding up our restaurant business and diversifying into real estate,” he adds.

Rajender Gupta, Managing Partner, Ratna Café, said the cost of the ingredients used for its signature idli-sambar has doubled over the past six months. These include Rajasthani coriander, chillies, raw rice from Guntur in Andhra Pradesh, pure ghee from Delhi and water treated by a RO plant.

Following the government’s request, a plate of two idlis is now being sold at Rs.12, against the Rs.13.50 they charged earlier.

Hotels have also begun to enhance storage capacity to stock up raw materials and trim manpower, says Mr. Ravi. Some hotels are switching over to cheaper ingredients. A hotel owner in Perambur says he is using cheaper vegetables such as cabbage and yam in the side dishes to make up for the increase in cost of ingredients such as rice. Cheaper varieties of pulses and rice are also being used to keep costs under control.

Customers are beginning to see a change in the quality of food. S. Manoharan, who eats at a small restaurant in Perambur says, “The amount of rice in meals served in hotels has decreased. The fried appalams (papads) supplied for the Rs.20 meals are also smaller. Even the dosas and idlis seem smaller.”

Prem Kumar, a regular at budget hotels, points out that the cost of meals had not been reduced in many of the hotels. The limited meals still cost between Rs.30-Rs.40. Hotels have also cut down on the quantity of gravy and vegetables. “Earlier, hotels were generous with their second helpings of rice or vegetables. Not any more,” he notes.

Customers also complain that in those hotels that have reduced the cost of meals to Rs.20, the food is of sub-standard quality.

© Copyright 2000 - 2009 The Hindu