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By 2010, smaller cities too would bask in 5-star hotel luxury

Industry watchers say the hotel industry is poised for maximum growth in smaller cities in the coming years with realtors entering the market, reports Jatin Gandhi.

entertainment Updated: May 04, 2007 18:11 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.

"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, the middle class travelling 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 with realtors entering the market.

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 this the 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, until now a real estate company, is planning to set up budget hotels and five stars in places like Bathinda, Indore, Kochi, 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. Bhagwati Banquets and Hotels Limited will develop a 100-room five-star hotel in Surat. Jalandhar may get its second five star hotel soon.

"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.

First Published: May 04, 2007 18:05 IST