30,000 new hotel rooms coming up by 2008-09
Many Tier II and III cities like Nashik, Baddi and Durgapur are now seen as potential hubs of hospitality industry, reports Madhurima Nandy.business Updated: Apr 07, 2007 04:48 IST
Hotels, which until now were mostly limited to metros and bigger cities, will soon enter smaller cities in a big way. Many Tier II and III cities like Nashik, Baddi and Durgapur are now seen as potential hubs of hospitality industry. The year 2006-07 also saw a huge penetration of several foreign and Indian brands who are now targeting these areas particularly for budget hotels.
In the recent second quarter, 2007 India Hotel Review report, property consultants Knight Frank India has observed how these mid-market products like Formule 1 (JV between Accor and Emaar MGF), Keys (Burrgruen Hotels), Red Fox Hotels (Lemon Tree) and HomeTel (Sarovar Hotels) are already on their way to build hotels in the economy segment.
Pranay Vakil, chairman of Knight Frank India explained that the main drive behind the penetration into Tier II and II cities is the IT sector that is now targeting smaller cities to set up base. "Metros are more expensive and hoteliers, particularly in the 2-star and 3-star categories, focus on these cities so that they can also exempt themselves from the service tax bracket."
Vakil said that spiritual tourism is yet another cause behind hotels coming up in smaller places like Shirdi and Mathura that see a lot of visitation by tourists on the religion trail. Parsvnath Developers for instance has launched a new hotel in Shirdi just 5 minutes away from Shirdi temple. The project worth Rs 20 crore covers an area of 50,000 sq ft.
Meanwhile, consistent low-supply of hotel rooms in the second half of 2006 and the beginning of this year will further push up the average room rate (ARR) to at least 18-20 per cent over the next two years.
In Delhi, for example, the ARR has grown from Rs 4,200 in 2003 to Rs 5,200 in 2004. By end-2007, the ARR in the region is expected to further grow and touch Rs 10,000. In Mumbai, the annual ARR was Rs 8,942 in which North Mumbai hotels in Bandra, airport area recorded an ARR between Rs 5800 – Rs 11,000 and South Mumbai hotels achieved an ARR of Rs 7339-10,562 in the same period.
A Knight Frank study has found out that 30,000 new rooms are in the planning or construction stage and will be ready by 2008-09 across five-star deluxe, five star, four star and heritage categories in the cities of Mumbai, NCR, Jaipuir, Kolkatam, Pune, Goad, Bangalore, Chennai and Kochi. Currently there are around 31,000 rooms across the same categories.
However, with supply clearly outstripping demand, occupancy rates have also seen a steady rise. In Mumbai, over the last three years, premium hotels have seen occupancy rates crossing 65 per cent that rose to 72 per cent in 2006. In Delhi, too, occupancy rates climbed up from 70 to 78 per cent and currently, is about 83 per cent.