Caro Hotels loses customers despite 40% price cuts

Caro hotel complex of Bucharest, controlled by Lazar family, has slashed accommodation prices by almost 40% since the start of the year from the same period of last year, in the context where more than half of rooms were vacant in the first months of the year.

“Demand from the corporate segment has dropped by as much as 25%, led by construction firms. Moreover, though we cut prices by 40% in the four-star hotel, there are companies requesting accommodation at half the current price,” stated Octavian Lazar, Caro Hotels manager. The Bucharest hotel complex, with 4.5m-euro turnover last year, is divided into three categories, the four-star Caro Golf, the three-star Caro Parc and the two-star Caro Horoscop, and is currently employing 140 people. In the wake of the price cuts shareholders have been applying since the start of the year, the rates for a room in the four-star hotel reached 89 euros, from 149 euros in early 2008. Though hotel owners’ opinions diverge on rate cuts, a survey by STR Global, including 13 hotels in Bucharest, shows the average price per room went down 6% in January from January 2008, to 391 RON, from 420 RON last year. The occupancy rate of Caro complex last year stood at 57.4%, down from 62% in 2007 and in the first months of this year Caro operated at an occupancy rate below 5%, the smallest level of the hotels’ past ten years of activity, according to Lazar. “We virtually had revenues matching the costs of the hotel, therefore zero profit. We hope to step into the black by yearend,” said the manager of Caro Hotels, a group that operated with a 30% profit margin last year. The hotel complex has 215 two, three and four-star rooms. “The highest demand is for the three-star hotel and it’s hard for us to reposition on the four-star segment, where we operate with 150 rooms, though the price gap stands at 20 euros,” he said. Lazar said he was currently rethinking the rate per room strategy, as one can no longer speak about a coherent price policy at the moment. Lazar expected 11% turnover growth for this year, but revised his estimated after the first months. “I hope we’ll get slightly above last year’s level,” he said. This year, Lazar family will invest in the development of a spa centre inside the hotel and in the construction of an office building.