Why HP govt hotels went bust in boom

Bhanu P. Lohumi

The good part first. The Himachal Pradesh Tourism Development Corporation (HPTDC) was a pioneer in tourism development in the hill state. It opened up areas not known and out of bounds to the average tourist, started the concept of budget holidays and showed a glimpse of what could be. Now, the what is part. Private hoteliers saw the potential, grabbed their chance and left HPTDC at a crossroads. Its cumulative losses over the years add up to Rs 23.34 crore.
Running 69 properties across the state, the public sector undertaking is unable to decide whether to become a purely commercial organisation or play a more challenging role as a facilitator. For the government, tourism remains a major employment sector in rural areas and so it is willing to overlook the losses. But for how long? The corporation is facing heat even from smaller players in the private sector. It is no longer the dominant player it was till three decades ago.
Experts feel that unless the government takes some urgent tough decisions, the corporation would not only continue to incur more losses, but also lose capacity to make further investment to strengthen and expand its activities, essential for its survival.
Most HPTDC units are located in major tourist destinations in prime locations — 16 in Kullu district, 12 in Shimla, 10 in Kangra, seven in Chamba, six in Solan, four each in Mandi and Sirmaur, three each in Kinnaur and Bilaspur, two in Lahaul and Spiti and one each in Una and Hamirpur. However, of the 69 units, 28 are in the red.
Besides these, the corporation runs five premium hotels — Hotel Chail Palace, Peterhoff, Hotel Holiday Home, Manali Log Huts, and Nagar Castle — and 36 deluxe hotels. The average occupancy here is over 55 per cent, letting these earn profit, but the potential to multiply the profits is vast, but unexplored.
Reasons for losses
Among the many factors that haven’t worked for the corporation are complacency, lack of professionalism, a “pick-and-choose policy” for transfers and promotions, and recruitment of untrained and unqualified staff.
Opening of units on political considerations and not on the basis of demand, viability and tourist traffic is another reason for losses. As a result, it is facing rugged competition from private players, even though most HPTDC properties had come up when it had virtual monopoly.
It doesn’t stop here. There is no accountability, no reward and retribution policy to encourage efficient workers and penalise non-performing staff. Though room rents and rates of eatables are revised periodically to match private hotels, there isn’t much to show for profit. Poor upkeep of properties and the casual approach of a large number of employees isn’t helping either.
The corporation has lost the competitive edge by recruiting under-qualified staff. Also, there is no mechanism to fix the break-even target of new properties and the gestation period. Its marketing offices have been unable to compete with private agencies and its transport wing is contributing to 48 per cent of the total losses.

Rescue plans afoot
Desperate, the corporation is making efforts to bring the sick units out of the red. It earned a gross profit of Rs 251.94 lakh and net profit of Rs 40.49 lakh in 2014-15, but the profits earned by 41 units are too little to balance the losses of the remaining units. As far as business is concerned, says Harish Janartha, HPTDC vice-chairman, the units are not running in losses. Depreciation of property, salary, retirement and other benefits are eating into the profits, he claims.
“Security and location-wise, we are the first choice of tourists. Our focus now is to change the image of tourism by providing professional services and let the message spread by word of mouth. The lift connecting the Cart Road to The Mall is ‘Kamdhenu’, earning the corporation Rs 73.11 lakh in 2014-15,” he says.
The total income for 2014-15, says Janartha, was Rs 8,068.58 lakh while the expenditure and depreciation was Rs 7,816.64 lakh and Rs 251.94 lakh, respectively. The HPTDC earned a net profit of Rs 40.69 lakh compared to a loss of Rs 406.26 lakh in 2013-14. The corporation is considering a more diverse role of a developer-cum-facilitator by foraying into adventure and water sports, private partnership in sick units and rationalisation of staff, which is next on its agenda.
The staff will be deployed strictly as per need and employees will be promoted on the basis of performance. The minimum eligibility for promotions has been reduced from five to three years for all streams without clubbing previous services, says the HPTDC vice-chairman.
Training sessions for employees would also be undertaken. While efficient employees would be rewarded, negligence and non-performance would attract stringent action. There are about 1,590 employees with the corporation and 130 utility workers, pushing the monthly salary bill to about Rs 3 crore.
It is roping in travel web portals to market its properties. To check losses, it would study the business report released by marketing offices across the country and shut down non-performing offices.
While there are no plans to sell or lease out sick units, it is open to competent parties investing in its properties on a sharing basis.

Misses: HPTDC had its chance but blew it

• Ashiana at Ridge: A few years ago, bids were invited for Ashiana restaurant of the HPTDC on The Ridge, Shimla. The highest bidder offered Rs 6.51 lakh per month, which implied that the bidder hoped to earn a fabulous amount from the prime property and could pay Rs 7.8 crore per annum after meeting all the operational expenses and profit margin. Later, the proposal was dropped due to opposition from employees’ unions. The total profit of the HPTDC from Ashiana and Goofa was Rs 23 lakh during 2014-15.
• Wildflower Hall: The HPTDC ‘lost’ Wildflower Hall, its prime property at Mashobra near Shimla. The Oberoi Group developed it, and it was rated India’s “numero uno” hill station hotel by TripAdvisor’s Traveller’s Choice Awards. Hotel Wildflower Hall, which was government property, was gutted in the early 1990s. In October 1995, the government entered into a joint venture agreement with the Oberoi Group to reconstruct the heritage structure of the British era while retaining 35 per cent equity, which was later reduced, resulting in a dispute in 2003. The arbitrator gave the award in 2005, which was subsequently challenged in court. Run by the Oberoi Group and situated at 8,250 feet, Wildflower Hall is a fairytale luxury resort set on 22 acres of virgin woods of pine and cedar. Former residence of Lord Kitchener, Wildflower Hall recreates the grand style of the colonial era.
• Aabshar cafe: The government sold its Aabshar cafe near Kandaghat after it incurred huge losses. The private party which took over the cafe has turned it around and now some more eateries have come up near it.
   
• Shivalik Hotel: Situated on the main highway at the entry point of Parwanoo, the Shivalik Hotel is running into losses, while Timber Trail, just 6 km away from the hotel, has expanded phenomenally
• Kullu-Manali Tourism Mega Circuit: The Central government had, in principle, sanctioned the Kullu-Manali mega circuit at a cost of Rs 33.71 crore. The sanction, along with the proposed allocation of funds for 24 components, was received on March 4, 2014, but other than detailed project reports, nothing has been done. The main components included construction of a convention centre, multipurpose hall and parking (Rs 5 crore); parking and recreation-cum-tourist facility (Rs 4.85 crore); pathway from Ramshila to Akhara bazaar (Rs 4.5 crore); and beautification and parking at Kala Kendra (Rs 2.25 crore).

Top 5 profit-earning hotels

Hotel Holiday Home, Shimla: Rs 286.43 lakh

 Hotel Chail Palace, Chail: Rs 154.93 lakh

Hotel Peterhoff, Shimla: Rs 70.93 lakh

Club House, Manali: Rs 63.88 lakh

Hotel Dhauladhar, Dharamsala: Rs 42.75 lakh

Top 5 loss-making hotels

Hotel Shiwalik, Parwanoo: Rs 42.07 lakh

 Hotel Iravati, Chamba: Rs 35.40 lakh

Hotel Pinewood, Barog: Rs 27.51 lakh

 Hotel Silvermoon, Kullu: Rs 20.42 lakh

Hotel Satluj, Rampur: Rs 19.22 lakh