Budget hotels get pricey

By Shivani Muthanna, CNBC-TV18

The no-frill travel experience may actually not fit into your budget aymore. A few weeks ago, it was low cost airlines that raised prices on the back of rising fuel costs. Now, budget hotels too have followed suit.

 The smart basics are now getting costlier. Take for instance the case of Taj Group's budget hotel chain- Ginger. Two years ago, the hotel charged a tariff of Rs 999 rupees plus tax. Whereas now its charging anything between Rs 1,999-2,999 plus tax. This is a rise that has come on the back of a severe shortage in branded no-frill rooms and increasing real estate prices.

Prabhat Pani, CEO, Ginger Hotels says,"It is currently a challenge since both real estate and input costs of construction, like cement and steel, have gone up especially in the past six months. But we are finding ways and means to manage our expansion."

That is a challenge that many other budget hotel chains like Clarke's Inn, Hometel and Peppermint too are facing. Tariffs at most of these hotels specially in metros, have nearly doubled these past few months. And now the branded budget hotel rooms in india are turning out to be costlier than similar propositions around the globe.

Now you can get a room in Accor Group's budget chain Formula 1 for anything between 25 to 40 euros across the world. But a room in Clarke's Inn in India is more than double and in other chains its between 40 to 60 euros round the year. You would think it is a skewed pricing strategy, but experts disagree. They say that with nearly USD 700 million lining up to create more capacity in this segment over the next few years, a correction in tariffs may not be too far away.

Manav Thadani, MD & Partner, HVS International says that,"I do believe they are higher than what they should be for budget hotels. But that's a supply issue, which would potentially correct itself as more hotels come online."