The Role of Public Sector in Hoteliering Business in India

It was not sure about the profit-making courses to be adopted. Amidst this chaos, government gave a direction to the economy by declaring the First Five Year Plan.

The First Five Year Plan (1951-56) had a two-fold objective-to rectify the anomalies in the economy caused by the partition and the Second World War and start a process of all-round balanced development.

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Thus, the State-owned corporations, commissions and public limited firms were created in all parts of the country to develop infrastructure in various areas of economic activity. The thrust of the Second Five Year Plan (1956-61) was on the development of basic industries, expansion of employment opportunities and reduction of inequalities in income.

WTO and Emergence of ITDC:

However, tourism was not a part of core sectors like steel, coal and power. The government was aware of this fact. Hence, it decided to cater to the needs of domestic and foreign tourists by creating State-owned hotels and restaurants in various parts of the country. India was a signatory to the treaties and conventions of the IUOTO. In 1947, the IUOTO was made redundant and replaced by the WTO.

India was its founder member and remains to till date. In a bid to expand her tourism operations and also to conform to the norms of the WTO, India decided to create state-of-the-art hotel facilities in major cities and at (ITDC) was set up in the year 1965.

It was created to blend public sector’s ownership with private standards of hotel service. It was the culmination of the dream of Jawahar Lal Nehru. It was one of the large-scale experiments carried out on the contemporary socialist canvas of India.

Time flew without giving any inkling that the tourism industry of India was in shambles. The ITDC did very well to begin with. It created and managed 26 hotels across the length and breadth of India. Foreigners were especially enchanted by the grandeur of Hotel Ashok (New Delhi), Hotel Khajuraho Ashok (Khajuraho), Hotel Laxmi Vilas Palace (Udaipur), Hotel Bodh Gaya Ashok (Gaya) and Hotel Agra Ashok (Agra).

The Unique Selling Proposition (USP) of these hotels was a blend of Indian history, cuisine and hospitality. There is no doubt about the fact that all these hotels remained the apples of the eyes of many a foreigner. But this dream of Nehru could not remain a reality beyond the year 1999.

Role of Public Sector Hotels:

There were 26 hotels operating under the aegis of the ITDC. Out of these 18, hotels have been sold so far. The remaining 8 hotels are painfully waiting for the axe to fall. So, in the context of the modern-day tourism, these hotels are not playing any concrete role.

Their clientele has been usurped by the hotels managed by the ITC Welcome Group, Asian Hotels Ltd., Bharat Hotels and the Oberoi Group of Hotels. The roles played by these hotels are-

1. These hotels became the symbols of Indian culture cuisine and hospitality. Hotel Ashok was built in the posh diplomatic area (Chanakya Puri) in 1956. The total area occupied by it is 16.11 acres. It has 560 rooms but its grand building was constructed without any plan or completion certificate.

It did attract a large number of foreign tourists; though the number of domestic tourists was low. In 2001-02, its losses were to the tune of Rs 9 crore (against a sale of Rs 37 crore). The wage bill was to the tune of Rs 23 crore.

In 1982, Hotel Kalinga was built at Bhubaneshwar. It has 64 rooms. In 2000-01, its losses were to the tune of Rs 1.4 crore (against the sales of Rs 98 Lakh). The wage bill was to the tune of Rs. 1.4 crore.

2. These hotels played conducive roles for developing the tourism industry of India. Till 1989, India remained a closed economic system. Hence, our hotels, shabbily managed by our bureaucrats, kept on working without any rules or moral restrictions.

Losses by these hotels in the recent years were so high that the nation was taken aback. Ministers, bureaucrats, top officials of the PSUs and rich businessmen misused them for their personal festivities.

These hotels were not required to pay land rent despite their prime locations and vast plots. Thus, the government remained callous in this context because it always viewed the black figures of these hotels as profits; these were, in fact, losses. Whereas these hotels attracted foreigners anal helped the ITDC earn foreign exchange, these did this at a cost, which the government ignored till 1999.

However, these hotels facilitated domestic and foreign tourist activities. These also gave a taste of Indian hospitality and warmth to the Indian and foreign tourists, delegates and politicians (VVIPs). And this is no mean achievement.

India was presented as a tourist-friendly, cosmopolitan and an ancient nation that was keen to expand her ties with all the nations of the world. There was a time when Hotel Ashok (New Delhi) was at its prime and the first destination (in India) of foreign visitors.

Evaluation of Public Sector Hotels:

Another factor, which helped the ITDC earn through its white elephants, was the absence of competition. Private graded hotels were far and few. The Taj Palace near Dhaula Kuan, Delhi and Maurya Sheraton, its neighbour, were the only two hotels that were able to offer competition to Hotel Ashok. Hyat Regency and Park Royal Intercontinental came up much later. Till 1989, the government did not liberalise investments in the hotel industry.

But when Indian economy opened its arms to the world, the hotel industry became the first beneficiary of the new economic policies of the State. It looks the government 10 years to realise that the private sector was zooming in at a fast speed and outsmarting the State-owned hotels in all the departments of hospitality.

Thus, we can conclude that the ITDC-led hotels of India proved to be costly affairs for the government. These hotels, however, provided accommodation and comfort to millions of foreigners and Indians.

These also created the image of a vibrant, ancient, warm and hospitable India. So, the role of public sector hotels in Indian economy was that of “image building for India” and not that of a “revenue making mechanism.” This fact was realised by the government 10 years after it had initiated the policy of free market reforms.

Contribution of the ITDC:

1. In 1996-97, the ITDC showed sales revenue of Rs 316 crore. This figure plummeted to Rs 313 crore in 1997-98 and to Rs 297 crore in 1998-99. Thus, decay had started in all the hotels by the fag end of the nineties. However; the government did not monitor these figures with interest because it had assumed that these sales figures were still quite healthy.

In 1999-2000, the ITDC showed a sales figure of Rs 288 crore and in 2000-01, this figure was Rs 305 crore. In April-December, 2001-02, the sales figures touched a low values of Rs 184 crore; this data was in sharp contrast to those posted by the corporation in fiscal years starting from 1996-97 up to 2000-01.

2. In 1999, Hotel Kanishka showed red figures for the first time. The ITDC had never seen red figures in its history. The occupancy fate of Hotel Kanishka plummeted to 28 per cent.

In 1997, this 325-room hotel in the posh central Delhi area could not book even 200 rooms; the national loss due to this vacancy of rooms was to the tune of Rs 90 crore. On the other hand, privately owned hotels, motels and restaurants were doing roaring businesses in 1997, despite the pangs of recession.

3. Till 1996-97, the profits of the ITDC were quite impressive. But, as already states, the process of decay had already begun. In 1996-97, the ITDC posted a profit figure of Rs 53.6 crore. It plummeted to Rs 43.3 crore in 1997-98.

In 1998-99, it showed a profit of only Rs 9.9 crore, a figure too small to be justified by monolith operating 26 hotels in India. Clearly, something was wrong and the government could small blood.

4. In 1999-2000, the ITDC showed its first ever red figures in its history; it showed a loss of Rs 24.4 crore in that fiscal year. In 2000-01, it showed a loss of Rs 35.5 crore. In April-December, 2001-02, it showed the wrath of the media and bureaucrats alike.

Its three major business operations-hotel, duty free shopping and travel-incurred losses. In April-December, 2001, the corporation confirmed that it had a sales figure of Rs 107 crore from the hotel business and its loss in this segment were to the tune of Rs 56.1 crore.

In the Duty Free Shopping segment, it posted a sales figure of Rs 52 crore and earned a loss of Rs 2.8 crore. And finally, it clocked a sales figure of Rs 24 crore in the travel segment and earned a loss of Rs 0.73 crore.

5. The government was in a mood to do away with the loss-making PSUs. Thus, it decided to put some hotels of the corporation under the guillotine. The staff, managers and bureaucrats associated with the ITDC as well as those connected with the tourism ministry (in the centre) raised an alarm.

But the union minister for disinvestment was adamant. Mr. Vajpayee, the PM, was also of the view that enough was enough. And hence, the process of selling off loss-making hotels began.

6. Our country has many people who pay a Brutus whenever they get a chance to do so. The decay of the ITDC was brought about by general managers and managers of various hotels owned by it. Further, a minister from the ministry of tourism was also alleged to have taken a telephone line from Hotel Ashok (Bangalore) for his private use.

Dozens of Mercedes cars were bought for Ashok Tours and Travels (ATT) during the eighties and sold for as little as Rs 4 lakh per car. Employees of the ITDC made money due to these sales. The income so generated was used to hide the operational losses of the ATT.

7. Further all the employees of the ITDC get a 60 per cent discount on food, lodging and wedding ceremonies of their children. General Managers are entitled to stay in the hotels of the ITDC (along with their families). Obviously, they invariably tell the ITDC to foot such bills as are created due to their stay.

In the past, managers also hosted parties in these hotels and did not pay a penny to the ITDC. The chefs of these hotels were known to have worked for the tourism minister (on a personal basis). Many employees stole corridor lights. The cooks and chefs of a five-star hotel of Delhi were forces to serve the political bigwigs (and the cost was borne by that hotel).

In 2001-02, the income of Hotel Ashok (New Delhi) fell to Rs 37 crore and its loss was Rs 9 crore. Mr. Jagmohan, the then tourism minister, visited this hotel and asked the government to spend Rs 100 crore for its republishing exercise.

Only 1 hotel of the 26 ITDC was making profits; all others were in the red. If the government were too deeply scrutinise these sordid details, it would find many more skeletons in the cupboard.

8. Thus, if we maintain contribution as the criterion for judging the performance of the ITDC, we can conclude the following points:

(a) The ITDC is a 38-year-old PSU and had 4,000 rooms spread across the length and breadth of India.

(b) It served foreigners, diplomats, Indian elite, Indian businessmen and fun lovers from 1965 up to 1998 with great zeal and enthusiasm.

(c) It is our opinion that its hotels and facilities were misused by bureaucrats, politicians, its own staff and friends/families related to its staff from day one! But we should also keep this fact in mind that the actual decay (on political and moral grounds) had started in India during the late sixties.

Therefore, in all probability, hotels and other facilities may have been misused from the late sixties onwards. It took nearly 31 years (from 1968 to 1999) to complete the decimation of the “mother of tourism in India,” an epithet fondly used by the staff of ITDC to describe their fold.

(d) The decay began to show up in 1998 (or 1999) and losses could not be hidden anymore.

(e) The staff, general managers and ministers of various ministers as well as bureaucrats misused the hotels and milked the precious resources of the ITDC.

(f) The ITDC did contribute towards the larger mission of development of tourism in India. But its employees as well as bureaucrats filled the, own coffers by availing free hotel, bar and party facilities of these hotels.

What they gained was luxurious living and not money. However, luxurious living can also be translated in terms of money: if you do not spend a penny on a party (being organised by you) in a hotel, you stand to save the money!

(g) We must admit that the ITDC created a good image of India among foreign visitors, political dignitaries from abroad and Indian businessmen. These customers or guests got very good impressions about out hospitality, culture, art forms, dances and the rich heritage of our past.

(h) Now that the process of disinvestment is in its full force, this giant tourist puller would fade into the oblivion. Those, who are actually responsible for its decay, May never, be brought to book due to their financial prowess, political affiliations and shrewd man oeuvres.

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