The higher is the price, the lesser would be the quantity of the product purchased from the consumer’s perspective.
We have understood that as per the law of demand, the Price, of a product purchased varies inversely with the quantity. In simple words, the higher is the price, the lesser would be the quantity of the product purchased from the consumer’s perspective. Again, if we try to understand the relationship between the Price and the quality of a product/services, we generally observe that higher is the Price, the higher is the Quality of the product or the services. Here the quality can be seen as a combination of attributes which makes the product/services expensive. Subsequently the product quality has positive impact on the customer loyalty. Here in this instant case, I am trying to find out a relationship among the Demand, Price and Quality in the hospitality Industry especially to the hotel and the restaurant sectors in present Indian context. This study involves all categories of the star hotels and the restaurants. Though I could not collect the samples through structured questionnaires but have spoken to more than 40 hotel General Managers who had opined verbally, related to these 03 criteria, Quantities - (No of rooms occupied), Price (Average Room Rent) & Quality. Since these 03 criteria are business confidential in nature the General Managers preferred to opine verbally.
There was a big hue and cry during the covid-19 period regarding the hospitality business beingstalled and came to a halt. Actually, the Hotel and the restaurant business came down to stand still, about 18 months. Hotels closed down, removed nearly 60% of their employees. The hotel industry survived andthe revival started from November 2021, picked up slowly and now at present, perhapsin one of its best periods in term of revenue earning. The average room rent (ARR) has increased significantly and the annual occupancy rates too improved drastically for majority of the hotels. This story is observed in each segment of the hotels in the country. The resorts have probably experienced the happiest revenue story.
The Commonalities among all the hotels are the high occupancy and the high average room rent (ARR). But another common complain keeps coming from all the hotels is the non-availability of skilled manpower. The hotels keep contacting the hotel schools’ repeatedly for trained manpower. Much to their frustration found very few candidates willing to join hotels.The situations in the hotel school are very discouraging with the high decline rate in the student’s admission. 50% seats in most of the hotel schools are lying vacant since last two academic sessions. Majority of the hotels irrespective of the star category are under staffed and finding difficult to retain their staff. The average attrition rate of the entry level employees in hotels is around 50%. Those hotels which closed down during the covid found little difficult to re-recruit the staff to the full strength and still had a high attrition rate.
The real boom came back in the hotel Industry during the mid-2022. Hotels started running full with high ARR. The Resorts in hills and beaches witnessed heavy inflow of the tourists. Even in many occasions the resorts had no time to make the rooms ready for the Tourists. The hotels fell short of the cleaned linens sometimes. During these periods the hotels were really found wanting in the trained and skilled staff which created lots of dissatisfied guests and complains. But such substandard hospitality services and substandard food never retarded the room bookings in the all categories of the star hotels all over India. The owners of the hotels were happy as they got a net profit margin ranging from 30% to 40%. As it is said often that if you get a taste greed then you forget about the people who earn for you. The hotel owners never thought seriously to keep their staff happy with appropriate salary and facilities.
The excessive workload on the working skilled staff even pressurized them to leave the hotels and join the stand-alone good restaurants. Such exodus further deteriorated the service standards of the star hotels. The banquets in the star hotels were worst affected as the casuals were engaged to take care of the services. In spite of such substandard food services and in the room services, the ARR kept soaring and the occupancy rate kept hovering around (80-90) %. When one raises the question of such substandard quality services in 05-star hotels, there is a standard reply from their Management blaming the non availability of the skilled students from the Hotel schools. It’s true that since last two years, the interest among the students in the Hospitality education has significantly decreased resulting in low admission and not preferring to join hotel jobs. The reasons of students not joining the hotel jobs are plenty. Gradually the quality of the students passing from the Hotel schools is deteriorating and may deteriorate further. The Hotels may find it difficult to retain good employees as the other industries are offering better compensation with better work culture and condition.
But I foresee and hope that the hospitality business may improve further as the economy grows in future. The quality hospitality services may be missing with the human touch. We understand that good service quality leads to customer satisfaction which creates more competition in the market. The customer satisfaction creates customer loyalty. The satisfied customers market the hotels at his own level while the dis-satisfied customers make all out efforts to de-market the hotels at all level. These concepts work very correctly in Indian Hospitality market at least. In future, no doubt people will be acquainted more to the mechanical services in hotels. The mechanical services may reduce the operation cost to some extent. I hope in future, the demand for the hotel rooms would be high, the Pricing would be high too, but quality services with human touch may be missing. The quality of hospitality services in a hotel depends on skills, commitment and attitude of the serving personnel. Hence, the economics thoughts and concepts may include a clause involving the Quality Mechanical hospitality services while co-relating the Quantity-Price-Quality for the present-day and future scenario in hospitality sector. The hospitality service sector is a sensitive sector which gets affected easily by natural disasters, men made disasters, legislation impact and political unrests. At the same time it takes time to recover from the impacts of the disasters. During this recovery period the hospitality sector loses maximum revenue which compels the management to retrench its skilled manpower. The retrenchment of the skilled manpower brings a serious resentment within the employees and the employees become a lifelong de-marketing force of the hotel profession. Hence, I feel that the hotel owners and the employers must think and act judiciously towards the welfare of the service staff so that the quality services remain proportionate to the price and the attrition rate of the hospitality staff is maintained at minimum.