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Editorial: Asia needs more mid-budget hotels

Published by The Straits Times, Singapore on 2004-07-10

Tourist and business traffic to Asian countries - particularly in South and South-east Asia - is growing significantly. This is good news for their economies, some of which depend heavily on tourism for hard currency. In the wake of September 11, the Iraq war, and SARS, tourism suffered enormously. Research by the Madrid-based World Tourism Organisation released this week at a meeting in Hyderabad, India, indicates that countries like Singapore, the Philippines, India and China are registering an increase of between 15 and 25 percent in tourists in the year to date, especially on account of the rebound of long-haul traffic from the United States and European markets. Malaysia has experienced a staggering 60 percent increase in tourism so far this year. But the WTO research also shows growing complaints by Asian travelers about the severe lack of clean and safe mid-budget accommodations in the region, rooms under US$75 daily that domestic travelers and backpackers can afford more readily. It's time that local entrepreneurs through Asia addressed the problem. There's money to be made in serving everyday people.

Perhaps these entrepreneurs can learn from the Indian Hotels Company Limited (IHCL), which runs five-star properties such as the Taj in Mumbai and has unveiled a new series of no-frills facilities called "IndiOne" hotels where daily rack rates for rooms are a flat US$25. Rooms booked through the Internet cost US$18. This is nothing short of revolutionary in an industry where the trend has been toward more luxury hotels as well as higher rates. It's also timely. That's because the bulk of everyday travelers in most Asian countries - but especially big ones like India - tend to be domestic traders, self-employed professionals, pilgrims, backpackers, and indigenous tourists. India, for example, gets about 5 million foreign tourists each year, including the so-called nonresident Indians (NRIs) who come home to visit their families. But there are nearly 20 million domestic travelers. Not all of them can afford hotels charging daily rates of US$150 and upward. They look for clean, secure and convenient accommodations without having to pay premium prices. Similarly, in Singapore there's no shortage of five-star hotels. Try finding something decent for US$25, however. With increasing numbers of budget-conscious tourists and mid-level executives coming to Singapore, Indonesia, Malaysia and the Philippines, mid-budget hotels are almost guaranteed to do well. It's a simple economic conundrum: there's heavy demand but no supply.

No-frill hotels would dovetail nicely with the growth in traffic on new no-frills airlines. Even with the relatively high cost of real-estate in the region, the low cost of building cheap hotels such as IndiOne (cost: US$2 million for a 101-room hotel) plus the large numbers of customers that they are sure to attract, could well recoup expenditures without difficulty. In fact, IndiOne's chief operating officer, Mrs Sheila Nair, says that she expects her company to break even within the first year. All around Asia one can finds scores of dilapidated old buildings - some of them historical in provenance -which could be converted, into budget hotels. Wouldn't some of the long neglected colonial-style bungalows in former British colonies, and the Spanish-style haciendas in the Philippines, make for inviting mid-budget hotels? Such conversion would also help preserve historical architecture in places where it's in danger of being demolished by builders of steel-and-glass edifices. In view of IndiOne's enterprise, and the fact that domestic travel has long been heavy in most of Asia, it's surprising that the concept of clean, cheap hotels offering a consistent experience hasn't been developed earlier. Prime Minister Goh Chok Tong, who is visiting India this week to strengthen trade, tourism and cultural ties, might want to nudge Indian companies like IHCL to venture into Singapore and other South-east Asian countries.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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