Over the past two months, several hoteliers in Chennai have noticed a disquieting phenomenon — conferences, events and weddings have been moving either to other south Indian cities, or to hotels situated away from the highways, thanks to what has come to be known, in some circles, as the Highway Rule.
Following the Supreme Court’s order banning the sale of alcohol within 500 metres of a State or National Highway, which came into effect on April 1, the MICE (meetings, incentives, conferences and exhibitions) segment has taken a massive hit. “MICE events account for close to 30% of the total food and beverages business in the hospitality industry. After the court order, a significant portion of the MICE market has shifted to Bengaluru and Hyderabad. Weddings too are shifting to other cities,” said T. Nataraajan, secretary, South India Hotels and Restaurants Association (SIHRA).
According to Sanjiv Puri, CEO and executive director of ITC Ltd., footfall has declined at the ITC Grand Chola in Chennai. “There have been a lot of cancellations in the MICE business. We also have a huge banqueting facility, and businesses have been impacted there as well,” he said.
Over the past decade or so, at least a dozen hotels, targeting the MICE segment, have come up along key arterial roads in the city — Anna Salai, East Coast Road and Old Mahabalipuram Road. They cater to the myriads of customers and groups visiting the city for business meetings and other work-related activities.
A CRISIL report on the impact of the liquor ban on highways, released in April, stated that business travellers, especially those from the automobile, IT and IT-enabled services sectors, form 85% of the clientele of premium Chennai hotels.
With over 5,000 rooms available in the three- to five-star category hotels in the city, and around 20 banquet halls capable of hosting 500 to 1,000 people, each MICE event typically brings in 1,500 to 2,000 people at a time, according to sources in the hospitality industry. In 2015, the Global Investors’ Meet attracted thousands of delegates, including at least 500 foreigners.
Most guests prefer to relax in the evening with alcohol and good food, industry representatives explained. At international conferences, up to 70% of the delegates are foreign visitors, many of whom pair their food with wine. “If we don’t serve liquor, the banquet business will move to other cities. As it is, India has a very small share of the world’s tourism market. It would be cheaper for conference organisers to opt for locations such as Hong Kong,” said R. Srinivasan, executive committee member, SIHRA.
Large hotel chains are not the only ones affected by the ban. Food and beverage revenues have declined by 30-40% since the court order, and specialty restaurants have been badly hit, said Mr. Nataraajan.
In the two months since the court ruling, the hospitality industry in Chennai has lost an estimated ₹3,000 crore, said a source.Some hotels that have branches on highway roads as well as other stretches, are offering their guests transportation to the liquor-serving branch, if they make a request.
Industry in doldrums
A total of 93 hotels in Tamil Nadu, which have invested ₹6,133 crore to promote tourism and employ about 9,500 people directly and 94,500 people indirectly, have been affected by the ruling, a document obtained from an industry source pointed out. The CRISIL report had also revealed that in Chennai, 48% of premium hotels would have to discontinue their liquor sales due to the ban.
Problems have been mounting for clubs as well. Around 120 bars attached to clubs have remained closed since April 1, and the loss to the industry is estimated to be ₹600 crore, according to Benze Saravanan, founder, Tamil Nadu Bar and Club Owners Association.
“All other States have taken steps to de-notify roads. In Tamil Nadu, the Commissioner of Municipal Administration had issued an order to local bodies to take over the roads. But nothing happened after that. Meanwhile, our losses have been running into crores of Rupees and we see a government that is only taking care of its own interests,” Mr. Saravanan rued.
The fact is that the government too has lost revenue due to the apex court ruling. Besides the revenue from the sale of liquor through Tasmac outlets, the government gets a license fee, tax of 55 % on the sale of foreign liquor, VAT of 14.5 % and a service tax of 6%. Bars purchase liquor worth between ₹30 lakh and ₹1 crore from Tasmac each month. Since the court order, the government is believed to have lost revenue to the tune of ₹5,000 crore, official sources said.
Employees suffer
With hardly any progress being made on resolving the issue, the hospitality industry says business in hotels on arterial roads has been crippled. This is affecting their employees too, some of whom are being forced to move to other industries. “As against ₹30 lakh in sales a month for an average club, we are getting just ₹5-6 lakh, which is hardly enough to cover salaries. Only a few rooms get booked and only vegetarian parties take place without bars. We continue to pay taxesbut nobody is listening to our pleas,” lamented the owner of a resto-bar. Hoteliers and bar owners apart, customers too are questioning the imposition of the ban. Youngsters frequenting popular bars at hotels say their options have narrowed. “The nightlife in the city was just picking up, with a lot of new places having been opened over the last couple of years. But now, we are back to having fewer options,” said a marketing professional.
Growing awareness
Citing the raison d'être of the SC judgement — to prevent drunken driving, and in turn, accidents on highways — some city-dwellers point out that the responsible drinking movement has actually gained momentum. A postgraduate student said that over the last few years, bars and pubs in the city have become more responsible, and have been engaging their patrons in discussions about drunk driving. “Many employees have also started talking about the importance of taking a cab or having a designated driver in the group. Youngsters who frequent bars are making use of prepaid cab services as a convenient option to avoid drunk driving,” he said.
“As far as pubs are concerned, our guests are very careful, especially after paying higher rates for liquor and considering their social stature,” said a hotelier.
At a time when the economy is going through a rough patch, and consumer spending has declined, the new norms will hit the hotels that survive on food and beverage sales even harder, said a senior member of a city-based commerce body. “If nothing can be done, they should perhaps think of rebranding themselves. GST however, will bring some relief to these hotels with its input credit,” he said.
(With inputs from S. Poorvaja and Sangeetha Kandavel)
