Cushman & Wakefield (C&W), leading global real estate consultancy reports that the hospitality sector will see a rise of over 65% in total hotel inventory by 2017. Approximately 52,000 new hotel rooms are expected to come into existence in the next 5 years (2013 – 2017). Despite a slower response, the Hospitality sector of India is expecting to witness better demand in the coming years on account of improved global economic conditions. Many Hotel projects, that were delayed in the last 2 years are also expected to get completed adding to the inventory in the next five years.
NCR is expected to contribute approximately 1/3 in the total expected hotel rooms supply in the period under consideration which is expected to see 17,000 keys, Kolkata at 105% will witness highest percentage increase in inventory by adding 3813 rooms to its existing inventory by 2017, Pune at 41% will contribute lowest number of rooms (2853) to its existing 6970 rooms.
Akshay Kulkarni, Regional Director – Hospitality, South and South East Asia, Cushman & Wakefield, said “Even while India is considered to be an attractive market for both leisure and business travel, there are some inherent deficiencies due to which hospitality projects have hitherto taken long to come up including aspects like funding and regulatory issues, which have either delayed or in some cases stalled projects. Despite a significant number of leisure travel both International and Domestic, hoteliers are seen to be concentrating on business destinations, specifically gateway markets of NCR, Mumbai and Bangalore.”
Akshay further said, “The expected growth in Chennai and Pune is largely driven by the current paucity of branded hotels in these cities, which has given the hoteliers an opportunity to look at upping their presence in the city. Taking cue from the economic fundamentals of the cities, which are strong on the basis of a more holistic growth of services as well as industrial sector, these cities are expected to see a corresponding rise in the estimated demand in the next few years as well.”
As opportunities with the development for Greenfield hotel projects decrease in the key hospitality markets – Delhi, Mumbai and Bangalore, the focus has been shifting towards regional epicentres of growth. This is in line with the shift of corporate centres and emergence of more lucrative
Of the total expected supply of hotel rooms in the next 5 years, midscale hotels are expected to see the highest supply of 18,500 units, followed by luxury which is estimated at 10,300 units contribute 36% and 20% to the total expected supply, while budget (9000 units) Upscale (6800 units) and Upper Upscale (6900 units) are estimated to be contributing approximately 44% to the total supply in the next 5 years. NCR will lead the pack on both these categories.
CITY-WISE OVERVIEW & OUTLOOK
Ahmedabad has about 3,439 keys in the organised segment as of 2013. Almost 4 new hotels opened for business in 2013, adding a total of 512 keys to the existing room supply, namely Tune Hotels (100 keys), Aloft (176 keys), Easy Eastin Citizen (52 keys) & Novotel (184 keys). Moreover, Crowne Plaza with 200 keys was also expected to start operations in 2013 but is currently on hold. Ahmedabad is expected to have addition of over 1,800 keys over the next 5 years. Of the total supply 39% belongs to upper upscale, 25% to midscale, 14% to luxury, 11% each budget and upscale.
Ahmedabad is a growing city with the potential to sustain much higher performance metrics. It is likely to see an upward movement in demand in 2014, given the upcoming inventory of office stock in the city and being an emerging city along with the development as a twin city, with Gandhinagar in the neighbourhood
Bengaluru has a total hotel inventory of approximately 11,089 rooms; Leela Place is currently the largest hotel in the city with a total of 357 keys. During the last 4 years, Bengaluru saw the largest increase in inventory during 2010, with 23%, with an addition of almost 1,522 keys with brands such as Lemon Tree (173 Keys), Vivanta By Taj (199 keys), and Crowne Plaza Electronics City (195 keys) etc
Bengaluru currently has a total upcoming supply 6,978 keys by 2017; of which 27% is expected to account for in the budget segment and in the midscale segment respectively, 25% in the upscale segment, 17% in upper upscale, and 4% in the luxury segment. Of the total upcoming supply, 38% is expected become operational during 2014, which includes brands such as Encore (90 keys), Double Tree By Hilton (185 keys), Hilton Residences (250 keys), Renaissance (278 keys), and Conrad (250 keys) etc.
Of the total room demand 60% percent comes from corporate clients and is further expected to see steady growth in time, as of Q4 2013, the YTD Absorption for commercial space had seen a 21.14% increase YOY, an indication of growing commercial demand in time, additionally Bengaluru currently has over 7.3 million sq.ft of Grade A office space under construction.
Chennai has a total hotel inventory of approximately 7,517 rooms. During the last 4 years, Chennai saw the largest increase in inventory during 2012 with 21%, due to the addition of the ITC Grand Chola (600 Keys), The Leela Palace (188 Keys), Park Hyatt (188 Keys), and the Radisson Blu City Centre (162 Keys). During 2013 the growth in inventory was only 3% with Westin adding an addition of 215 keys to the inventory.
Chennai currently has a total upcoming supply of 3,274 keys by 2017; of which 51% is in the midscale segment, 29% is in the budget segment, 11% in the upper upscale segment, and 9% in the upscale segment. Approximately 20% of this total inventory is expected to become operational in 2014, which includes brands such as Ibis (160 keys), Gateway (159 keys), Formule 1(150 keys), and Holiday Inn (200 Keys), etc.
Chennai is a major upcoming commercial destination, with the development of the Chennai Bengaluru Industrial Corridor; the region is expected to see some major planned commercial and industrial development in the long run. Chennai is currently seeing a slight oversupply particularly due to major inventory increase over the past 2 years. The AOR in 2014 is expected to be 59% with an ADR of INR 5171.
Hyderabad has a total hotel inventory of approximately 6,448 rooms. During 2013 inventory grew at 6%, due to the recent opening of Trident Hotel (323 Keys) in Madhapur. The average inventory per hotel is currently 46 keys with Westin having 428 Keys in Madhapur. Within Hyderabad, the midscale segment constituted 45% of the total inventory, followed by the upper upscale segment with 19%, upscale and midscale with 17%, and budget with 2%.
Hyderabad currently has a total upcoming supply of 4,057 keys; of which 46% is in the midscale segment, 23% is in the budget segment, 13% in the luxury segment, 12% in the upscale segment and 6% in the upper upscale segment. Approximately 50% of the upcoming supply is expected to open in 2014, which includes brands such as Formule 1 (174 Keys), Mercure (128 Keys), The Oberoi (220 keys), Hyatt Place (148 keys), etc.
Of the major micro markets existing in Hyderabad, Gachibowli and Madhapur are seen to be the prime destinations for upcoming commercial and office space ventures in the city, which is likely to augment an increase in room night demand in the future for the micro-markets.
The city yet still lacks stability; the state most particularly saw a number of civil disruptions during 2011 and 2012. The issue has not been resolved, however talks are on. If Telengana is created, Hyderabad shall act as a joint capital for Andhra Pradesh and Telengana for upto 10 years. The AOR in 2014 is expected to be 42% with an ADR of INR 5,231.
Kolkata has a total hotel inventory of approximately 3,638 rooms with the largest hotel in Kolkata is currently the ITC Sonar Bangla with a total of 238 keys. Kolkata currently has a total upcoming supply of 3,813 keys by 2017; of which 34% is in the midscale segment, 30% is in the luxury segment, 19% in the upper upscale segment, 10% in the upscale segment and 7% in the budget segment.
The majority of the inventory, about 41% of the upcoming supply is expected to open in 2014, which includes brands such as Westin (323 Keys), Novotel (350 Keys), JW Marriott (300 keys), and the Lalit Great Eastern (244 keys).
Kolkata has some significant upcoming infrastructure such as the Light Rail Transport System, Mono Rail, Eco-Park, etc. The Expansion of the airport is likely to augment travel within the region to far greater extent, allowing for an increase in room night demand. The major Suburban development in areas such as New Town and Rajarhat are the most predominant, which includes a number of upcoming hotels such as Formule 1, Ibis, Novotel, Westin, etc. The AOR in 2014 is expected to be 45% with an ADR of INR 5,293.
In Mumbai, the midscale segment is seen to have the largest inventory of 29%, followed by budget segment with 27%, luxury with 23%, upper upscale with 11 % and upscale with 10%. The average inventory per hotel is currently 91 keys; the largest hotel currently operational is the iconic ‘Taj Mahal Palace’ located in South Mumbai with a total of 560 keys.
Mumbai currently has a total upcoming supply of 12,098 keys; of which 35% is in the midscale segment, 22% is in the luxury segment, 17% in the upscale segment, 16% in the budget segment and 10% in the upper upscale segment. Approximately 17% of the upcoming supply is expected to open in 2014, which includes brands such as Lemon Tree (298 Keys), JW Marriott (525 Keys), Radisson Blu Plaza Hotel Powai (335 Keys), etc.
The city has a total of 12, 098 keys upcoming, which accounts for almost 71% of that of the existing pipeline. Mumbai has a significant number of upcoming infrastructure, which is expected to enhance connectivity within and to the city. This includes the opening of its much awaited new airport terminal in February; the new airport is to boost passenger capacity by 40 Million over the existing capacity of 30 Million. Additionally, Navi Mumbai itself is expected to see development of a new airport, which as a result is expected to augment demand for the micro-market in the long run.
In 2013, NCR had 26,500 keys by out of which, 77% comprises of the organised segment. NCR featured a 16.5% YOY growth in total organized supply of over 20,457 keys during 2013. Close to 15 new hotels opened for business in 2013, adding a total of 2,920 keys to the existing room supply. NCR is expected to have an addition of over 17,000 keys over the next 5 years, of the total supply, 31% belongs to Delhi, 27% to Noida, 22% to Noida, 12% to Greater Noida, 5% to Manesar and 3% to Faridabad.
NCR's hospitality market is substantially covered under seven main regions. Among micro-markets, Delhi achieved highest ADR of INR 7,980 at 62% occupancy, followed by Gurgaon with INR 7,550 at 60%, Noida with INR 6,500 at 61%, Faridabad with INR 5,400 at 50%, Greater Noida with INR 5,200 at 39%, Manesar with INR 4,650 at 49% and Ghaziabad with INR 3,980 at 52%.
NCR is witnessing some major infrastructural changes towards transforming hospitality dynamics of the region, Delhi hotels have recently got an approval from Delhi Development Authority for higher FSI as well as a grant to build small dwelling units in hotel complexes that will support debt-funding. Also, government has included hotel projects with costs higher than 200 Cr in infra-lending list which will support high end hotels in availing low interest funding. Thus, the NCR hotel market is indeed positive in outlook.
Pune has a total hotel inventory of approximately 6,970 rooms. During 2013 the city witnessed an increase by 8%, with the opening of Novotel (251 keys), Formule 1- Hinjewadi (105 keys), Courtyard By Marriott- Chakan (180 keys), Doubletree by Hilton – Chinchwad (115 keys ) etc.
Pune currently has a total upcoming supply of 2,853 keys; of which 40% is in the midscale segment, 20% is in the luxury segment, 18% in the upper upscale segment, 13% in the budget segment and 9% in the upscale segment. During 2014, almost 24% of the total supply are expected to open, with brands such as Hyatt Place (130 Keys), Lemon Tree Pune City Center (230 keys), Country Inn and Suites (230 keys), etc
The IT Parks situated in Hinjewadi, Talawade and Kharadi have acted as a catalyst as a constant attraction for the attention of global players and driving traffic to the city. With new businesses entering the market, the conference, conventions and events market too is expected to gradually swell further. Furthermore, there are plans of expanding to make a new airport which indicates the industry is deemed to see growth in footfall numbers in the city.
Additionally, Pune had witnessed a increase commercial space absorption, as of Q4 2014 the city had witnessed a YOY increase in absorption by 21.14%, of which, during the 4th quarter alone the city witnessed over 470 thousand million in absorption. The IT-ITeS sector contributed to nearly 58% of the absorption followed by the BFSI with 17%, a major indicator of growing corporate room night demand in the city.