Hotels charge what they think the market can bear. There is no set formula. Prices of wine are based only on a desire to maximise profit and I have my ex-boss to thank for this piece. It happened this way. I was sitting at the Orient Express having a quiet family dinner when I noticed that the restaurant’s staff was buzzing around a VIP table at the end of the restaurant.
It turned out to be Aveek Sarkar, who paid my salary till 1999 (when I left ABP and joined the HT), along with TN Ninan (another ex-employee of Aveek’s who now heads Business Standard), Chiki Sarkar (Aveek’s daughter who has just been appointed head of Penguin on her own merits, though Penguin India is also part of Aveek’s empire) and Nandan Nilekani (who needs no introduction).
This star-studded gathering was interrupted when Aveek set off for the loo. He passed our table, took in the very nice, but hardly exceptional, wine that we were drinking and generously promised to send over a bottle of the stuff his table was quaffing. It turned out that Aveek, Ninan and gang were drinking one of the world’s most famous wines, Mouton Rothschild, a first growth from Bordeaux. It also turned out that they had drunk the hotel’s entire stock of Mouton 1998 (according to Aveek, an exceptional year) so Aveek asked the sommelier to send us a bottle of the 1999 vintage (“good but hardly in the same league,” he said, stroking his beard thoughtfully) and to put it on his bill. I would never have been able to afford Mouton Rothschild at the Orient Express so we accepted the bottle gratefully as a gift from an ex-boss to an ex-employee and did not dare ask how much the wine cost. But the next day Aveek called. “Do you know how much the Mouton cost?” he asked. I gulped and said nervously that I had no idea.
“Well, the 1998 we were drinking cost Rs. 39,900,” he said (and there was a pause in the conversation owing to my sharp intake of breath), “but the 1999 I sent you was Rs. 28,0900.” “Ah, yes,” I said, not sure where the conversation was heading. “I am having dinner with a very high profile person today,” he continued (more high-profile than the claret-swilling Ninan and Nandan?), “and I thought I would order the same wine at the Oberoi. But do you know how much the Oberoi charges for exactly the same bottle?” I indicated that these were not wines I ordered on a regular basis, the way he did, so could he please just tell me what the Oberoi price was? “It is one hundred thousand rupees!” he expostulated. “Not the 1998, which is the more expensive one. That is how much the Oberoi charges for the 1999! And the Taj Palace only charges Rs. 28,900! How can they justify it?” I mumbled something about how the Oberoi’s prices included tax while the Taj Palace’s prices do not but I knew that taxes, though high (around 29 per cent) could not account for the vast price difference. (Rs 1 lakh versus Rs. 28,900.) “There is a piece in this,” said Aveek.
And as the man had been my boss (Editor-in-Chief of all ABP publications) for over a dozen years, who was I to disagree?Besides, he was right. If there are such huge disparities in wine pricing, consumers needed to be made aware. None of us will order the same wines as Aveek does, but the principle of variable pricing is a dangerous one.
So, I looked at the wine lists of other deluxe hotels. The 1999 Mouton on the Imperial list (the wine Aveek had sent me and which cost Rs. 28,900 at the Taj Palace) was Rs. 62,000 or more than double the Taj Palace price. (But still cheaper than the Oberoi!) The Leela Palace had an even more outrageous price: Rs. 1,25,000. If you include around 29 per cent in tax, that meant that the wine would cost around Rs. 1.6 lakh or 60 per cent more than the Oberoi’s price! (The Maurya doesn’t have much quality wine so the Mouton doesn’t even feature on its list. Though I am assured that ITC will now take wine seriously.) I then had another thought. There are two Taj hotels in Delhi. Do they charge the same amount for wine? Apparently not. At the Taj Mahal, they did not have the Mouton 1998 (the wine that Aveek, Ninan etc. drank the Taj Palace out of) but they did have the 1999. They were selling it at Rs. 58,000. That was nearly twice the price of the Taj Palace’s Mouton 1998 but still a fraction of the R1,25,000 that the Leela Palace charges. Even so, it seemed a bit odd for one Taj to charge twice the price for the same bottle of wine as the other. All this got me thinking. Is there any logic to wine pricing? How can the Leela charge Rs. 1,25,000 for a wine that costs Rs. 28,900 at the Taj Palace, a mere 10-minute drive away? I can understand Le Cirque charging more than the Orient Express (though Aveek also insisted that the food at the Orient Express was far superior to Le Cirque) because restaurant prices are subjective. But a bottle of wine is the exact same product. Could it be that hotels think that the rich don’t care; that if somebody is willing to pay Rs. 30,000 or so for a bottle of wine, he won’t mind paying Rs. 1.6 lakh for the same bottle? If so, then they are clearly wrong, judging by Aveek Sarkar’s reaction.
Given that most of us will have to mortgage our homes to pay for the kinds of wines that Aveek Sarkar drinks on a regular basis, I don’t suppose we should worry too much about the prices of first growth clarets. On the other hand, many of us will order say, a bottle of champagne, at one of these hotels to celebrate a birthday or an anniversary or something special. Does the same principle apply? Do champagne prices vary as dramatically? It turns out they do. I took as my starting point, the price of basic Moet et Chandon, the world’s best-selling champagne. Nobody will confirm this in writing but hotels buy it for something like Rs. 1,800 to Rs. 2,000 a bottle.
What they sell it at is a different matter. Here is a comparative list of the prices of a bottle of Moet et Chandon.
Taj Palace: Rs. 5,500
The Oberoi: Rs. 9,000 (includes tax)
Taj Mahal: Rs. 5,000
The Maurya: Rs. 7,700
Leela Palace: Rs. 7,200
So will somebody explain to me how the same champagne can go from Rs. 5,000 (the Taj price) to Rs. 7,700 (the Maurya price) to Rs. 9,000 (the Oberoi though that includes tax)? It is an easily available wine bought from the local outpost of Moet et Chandon by everybody at roughly the same price.
When you look at premium champagnes, it gets even more confusing. Here are the prices for the 2000 vintage of Dom Perignon (also made by Moet et Chandon).
The Oberoi: Rs. 22,500 (includes tax)
Leela Palace: Rs. 20,000
The Maurya: NA but the 1999 is Rs. 27,500
Taj Palace: Rs. 15,900
Taj Mahal: Rs. 22,000
So how does the Taj Mahal justify charging Rs. 6,000 more than the Palace (about 40 per cent more) for exactly the same wine? I think you have got the point by now. Hotels charge what they think the market can bear. There is no set formula. Prices are based only on a desire to maximise profit. As a general rule, I found that the cheapest wines (across all price brands) were at the Taj Palace; and the most expensive were at the Leela. At the Imperial and the Taj, where prices were higher than the Taj Palace, the range of the wine list made up to some extent though, in my view, there is nothing to touch the Taj Palace’s list, for price and range.
Perhaps I am wrong. Perhaps Aveek Sarkar is an exception. But my guess is that as Indians become more knowledgeable about wine, they will start resenting being ripped off. Even if they can afford expensive wine, they will not condone highway robbery. They will just stop frequenting hotels that cheat their guests by ripping them off on wine sales.
One Wine – Many Prices
The Cloudy Bay Sauvignon Blanc is one of New Zealand’s most famous wines. The winery is now owned by Moet et Chandon, which supplies the wine to Indian hotels. Even so prices vary.
Here are the prices of the 2010 vintage.
Taj Mahal: Rs. 7,000
Leela Palace: Rs. 7,500
The Imperial: Rs. 9,100
The Maurya: Rs. 8,000
The Oberoi: Rs. 8,000 (includes tax)
Taj Palace: Rs. 4,700 (2007 vintage)
The Taj Palace is the cheapest. The Imperial and the Maurya are the most expensive. Every hotel should be able to buy the wine at the same cost. The difference in selling price only demonstrates the levels of greed.
Storm in a wine glass
It is a common enough phenomenon at five-star hotels. Guests arrive for dinner. The waiter suggests an aperitif of a glass of champagne. Guests think it sounds too cheap to ask how much? So, they just say yes, thinking it can’t cost that much.
Actually, it can. Most hotels buy their basic champagne at around Rs. 2,000 a bottle or less. But, as I discovered, that isn’t always reflected in the prices charged to guests.
My colleague, Tavishi Paitandy Rastogi, asked Delhi hotels how much their cheapest glass of champagne was. The variation in price went up to 90 per cent.
Shangri-La: Bollinger Special Cuvee; Rs. 850
Leela Palace: Louis Roederer NV; Rs. 1,350
Taj Mahal: Pommery; Rs. 800
Taj Palace: Mumm Cordon Rouge; Rs. 1,100
ITC Maurya: Piper-Heidsieck; Rs. 950
The Oberoi: Moet et Chandon; Rs. 1,500 (includes tax)
The best value is the Taj Mahal. The worst is that serial offender, the Leela Palace, more expensive even than the Oberoi once you have added tax.
From HT Brunch, September 25
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