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RBI notification on dual pricing not to impact hotels' margins

Tunia Cherian George

Mumbai , Aug. 29

THE recent RBI notification preventing hotels and restaurants from insisting on dollar payments by NRIs and foreign customers is unlikely to have any impact on their margins.

According to hotel industry sources, the RBI directive does not prevent hoteliers from following a dual pricing policy.

Under the pricing policy, hotels charge their non-resident or foreign guests a dollar tariff, which is usually pegged 10-15 per cent higher than the rupee tariff applicable to their Indian guests.

The higher tariff structure is significant given that the majority of guests at five-star hotels are from abroad.

"The hotel industry has no issue with the recent RBI statement advising hotels not to insist on dollar payments from their foreign customers and NRIs," says Mr Shyam Suri, Secretary-General, Federation of Hotels and Restaurants Association of India.

The RBI release had said that the practice of quoting a differential tariff in dollars and insisting that the payment is made in dollars was inconsistent with the Foreign Exchange Management Act, 1999.

According to Mr Suri, the RBI release only says that under FEMA 1999, even if a hotel quotes in dollars, guests have the facility to pay in local currency. The rule did not, however, restrict hotels from maintaining a dual pricing policy, he said.

"None of our members have any objection to the above rule. In fact, we notified them of the change back in 2002 and they have adhered to the rule since then," said Mr Suri.

Most five-star hotels quote a dollar tariff to their foreign and non-resident Indian guests, and a rupee tariff to their Indian guests.

According to Mr Sanjoy Pasricha, Corporate Head, Sales and Marketing, The Leela, the dollar tariff quoted to their foreign guests is the right rate, and Indian guests were being given a discount to the standard rate.

The Hyatt group in India shifted from a dual to a single tariff structure in January this year.

According to Mr Ratnesh Verma, Area Director for South Asia, Hyatt, the shift to a single tariff rate was in line with the pricing policy followed in the developed economies. The single tariff rate, he added, was decided by the demand-supply dynamics of the particular hotel.

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