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The US-led campaign against terrorism starting with the war in neighbouring Afghanistan took a heavy toll on Pakistani hotel industry

By Syed M. Aslam
June 03 - 09, 2002

The Pakistani hotel industry, particularly the handful of international chains, is heavily dependent on foreign-induced business such as airline crew, transit air travellers and foreign and local guests of multinationals operating in the country. The primarily business of hotels in Pakistan, like elsewhere, is to fill the rooms which not only contributes major share to their overall revenue but to also supplement the income through increased sales of food and beverage. It is also dependent on walk-in traffic at one of many restaurants that these chains house. In the end, however, room occupancy rate is regarded as the benchmark to evaluate the performance of hotel as it singly makes all the difference between making or breaking.

The ripples of the post-September 11 events were felt all over and Pakistan was no exception. The turning of the country into the frontline state in the US-led campaign against terrorism starting with the war in neighbouring Afghanistan took a heavy toll on Pakistani hotel industry. According to a source in one of the international chains in Karachi, prior to September 11 the average room occupancy rate at his hotel was a comfortable over 70 per cent which was drastically reduced to non-economical levels of 40 per cent in November and stayed there for next few months. However, the source claimed, that the competitors took a much worse battering as their important room occupancy rates dropped to an highly uneconomical level of 15-20 per cent.

The Pakistani hotel industry still struggling to recover from of slump suffered a devastating blow once again on May 8 when suicide bombing claimed the lives of 11 French naval workers plus personnel of Pakistan Navy in Karachi. The ripples of the gory incident was felt more profoundly by the hotel industry as it took place right in front of two international hotel chains located across the street in the posh area of the city. The explosion caused heavy damage to the restaurants as glasses flew all over in the premises of these hotels.

At the time of the incident Pakistani and New Zealand cricket squads, both staying in one of the two hotels, were about to leave for the National Stadium to play the test match. The New Zealand squad flew of the country without playing the test while the members of the Pakistani squad also chose to leave the hotel the same day.

At present, informed sources in the hotel industry told PAGE, the average occupancy rate at two of the chains has dropped to moderate 55-65 per cent while it is hurting the third more profoundly. A source at the hotel hit most profoundly told PAGE that the situation is indeed 'not good.' "The guest traffic sponsored by multinationals operating in the country is just not coming and the business from foreign airlines has also come to a stop."

Refusing to be more specific, the source said while the substantial drop in business is taking a heavy toll on the hotel's revenue the fixed expenses remain the same causing great financial discomfort for the organisation. "The hotel industry, five-star hotels in particular and all others in general, is suffering."

Another source in the hotel industry told PAGE that the business from foreign airlines have dried up since May 8. "Prior to September 11 all the international chains had contracts with foreign airlines to provide boarding and lodging to their crew. With the suspension of operations by a dozen foreign airlines to Pakistan after September 11 this captive business dried up but started picking up when many of them resumed their operations. However, after that ghastly incident last month the hotels are once again deprived of the business as foreign airlines are no more accommodating their crew in the local hotels."

The heavy dependence of the five-star hotels on the foreign-induced business and the stoppage of the captive business emanating from the airlines and multinationals is also resulting in drop in sales of food and beverage, the biggest portion of which comes from the guests. In addition, sources told PAGE, that the local component of the walk-in traffic to restaurants housed in these hotels have also dropped significantly recently to pose further problems to an already struggling industry.

The situation has forced many hotels to resort to promotional campaigns to draw the locals into the hotel. For instance, a five-star hotel is banking on the World Cup Football event to give its dropping revenue a boost. It has made arrangements to install big-screen televisions at all the restaurants, lobbies and lounges welcoming the enthusiasts with a free soft drink as well as offering prizes to the walk-in traffic.

Sources in the hotel industry stressed that the hard time necessitates the need for giving some sort of fiscal incentive to the hotel industry. For instance, at present every room occupied is subjected to a 23.6 per cent tax which differ from hotel to hotel and room to room depending on the rent. Abolishing the tax or at least reducing it can do a lot of good to the strolling hotel industry of the country, a source stressed.