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Small cities to have five star hotels

With a shortage of 61,000 rooms in small cities, real estate companies are making a beeline to cities like Bathinda and Surat to set up hotels, reports Jatin Gandhi.

india Updated: May 04, 2007 21:09 IST

Call it the trickle down effect. By 2010 or so, travellers to smaller cities like Bathinda, Indore, Jalpaiguri or Surat would have the luxury of staying in five star hotels.

Zoom Developers, a real estate company is planning to set up five stars in places like Bathinda, Indore and Kochi. Bhagwati Banquets and Hotels Limited will develop a 100-room five-star hotel in Surat. Jalandhar may soon have its second five star hotel soon.

"There are as many as six five-star hotels coming up in different places in Kerala," says Kamal Sharma, secretary general of the Federation of Hotel and Restaurants Association of India (FHRAI). "Most five stars are coming up in places that are in tourists destinations or have big commercial enterprises like SEZs coming up," Sharma adds.

With the economy booming and the fact that the middle class travells more for work and leisure, hotel occupancy rates are at an all time high. Industry watchers say the hotel industry is poised for maximum growth in smaller cities in the coming years.

According to a study conducted by FICCI and Evalueserve, the revenue per available room in the country increased last year to Rs 3,765 from Rs 2,966 in 2005, registering an increase of nearly 30 per cent. While average room rates increased from Rs 4876 to Rs 6206 in the same period. Everybody wants to cash in on the boom.

"The hotel industry is booming because of the real estate boom and we wanted to encash the opportunity as well. There is bigger potential for growth in smaller towns," says Pradeep Jain, chairman, Parsvanath Developers Private Limited. The company, initially a real estate developer too has entered the hotel business. It is now setting up hotel projects in Ujjain, Haridwar, Indore, Lucknow, Ahmedabad, Hyderabad and Kochi. Jain adds that the growth in the industry will be largely in tier-2 and tier-3 cities in the next five years or so.

Zoom Developers is also setting up 20 budget category hotels in cities such as Raipur, Bilaspur, Bhubaneshwar and Nagpur. "The shortage of rooms in smaller towns is around 61,000 right now. The gap between demand and supply is expected to widen further," says Ramneek Bawa, the company's CEO.

"As of March 31, 2007, the average demand for hotel rooms in smaller cities was 120 per cent as compared to about 90 per cent in bigger cities. The hotel trade in smaller cities is expected to grow at 8.8 per cent. So we decided to enter the hotel industry," Bawa adds.