By: Ravi Sinha
Track2Realty Exclusive
The Indian strategy in the hospitality segment seems to be borne out of the demand-supply market dynamics. An industry survey estimates that the three major Indian metropolitan areas—Bangalore, Mumbai and Delhi—command some of the highest hotel rentals in the world.
The study, conducted by Indusview Advisors, found that Bangalore had the world’s highest room rentals, averaging about $500, with Mumbai ($400- 450) coming in a notch lower and Delhi ranking third at $350 plus.
Internationally, London hotels charge $300-450 while star properties in Moscow and Rome charge $260-350 and $140-350 respectively. While the situation is acute even in traditional high-cost cities such as New York where room rates spiraled up 15.4 percent last year to an average of $320.87, according to an American Express report some of the strongest surges have been in Asia.
The Indian hotel room market for 10 metros is estimated to expand at a compounded annual growth rate (CAGR) of 17% to Rs. 11,900 crore during 2010-13, according to a study by Knight Frank India. In terms of the number of rooms sought per day, the hospitality sector is estimated to grow at a CAGR of 10.3%. But at 15% growth during the period, supply is expected to surpass demand. A total of 24,211, 8,709 and 3,057 additional rooms are expected to become operational by 2013 across upscale, midscale and economy category hotels, respectively, the study said.
However, if growth prospects are driving the sector, there are roadblocks at policy and macro economic level that threaten to derail the growth. Many leading hospitality companies looking at expansion are either deferring launches or stalling projects on the back of various challenges including fund crunch and hassles in getting permits.
According to a study by consulting firm HVS, the hospitality companies had announced to add 90,000 rooms by April 2015. Realistically, industry experts say, only two-thirds of the figure will materialise by then. Of the rest, some will get delayed and others shelved.
…..to be continued
