Hotels Planning for Future

Market Survey BY: DR I. SATYA SUNDARAM HOTELS PLANNING FOR FUTURE India needs more budget hotels. We do not have adequate number of quality hotel rooms available at reasonable rates. he year 2005 was very ness hub and a major focus for devel- Rs 18 billion mid-hotel segment is favourable for India’s oped countries. But, the current expected to burgeon to Rs 46 bil- hotel industry as occu- availability of 150,000 registered lion by 2010. pancy was never so good. rooms is low compared to one mil- All major cities are going to ex- Room rents too have sky- lion rooms in China. perience shortage of hotel rooms by Trocketed. The reason is: the short- The World Travel and Tourism 2009. Hyderabad needs 8000 rooms age in the country is as much as Council (WTTC) estimates that against the supply of 5400 rooms, 90,000 rooms (5-star and above). In tourist arrivals to India would grow Goa requires 6500 rooms against the fact, there is a seller’s market in this at 10 per cent per annum till 2012— supply of not more than 2800 rooms, segment. The year 2006 may wit- one of the highest in the world. The Chennai needs 7500 rooms against ness an addition of just 5000 rooms. hotel industry certainly wants to the supply of 5000 rooms and Ban- India is no doubt a global busi- take advantage of this situation. The galore requires not less than 15,000 The Lake Palace Hotel, Udaipur Market Survey Group also wants to open a chain of budget hotels at Coimbatore, Madurai and Tirunelveli in the com- ing years. The three-star hotel at Trichy, built in 1988, is being reno- vated. Ceebros, a leading property de- veloper in Chennai, wants to enlarge its presence in the hospitality sector. It desires to add 400 rooms through two new hotels, taking its tally to over 500 rooms under its brand ‘Raintree.’ It entered the field in June 2005 with a 105-room boutique hotel ‘Raintree.’ The occupancy level is comfortable at 75 per cent consistently. Hilton, which entered India through a strategic alliance with the Oberoi group in 2004, plans to launch two more brands in India—the Conrad and the mid-market Scandic. It wants to treble its presence in the Indian market over the next five years. At present, Hilton has a marketing tie-up with East India Hotels, The Oberoi Udaivilas, Udaipur and is working on setting up two hotels in Bangalore and one in Chennai rooms against the supply of 6800 tels globally taking the count to 2282 with the help of its local partners. rooms. international rooms in 11 countries The Bangalore-based Royal Or- outside India and a total of 8771 chid Hotels is investing over Rs 730 Recent developments rooms at all its properties. million on renovation and expansion The Welcomgroup has a chain of plans across Mysore, Jaipur, The Taj Hotels Resorts and Pal- 65 hotels under different brands— Hyderabad, Pune and Bangalore. aces has entered into a strategic alli- the top-notch ITC prefixed brand The Group has taken over the ance with South Korea’s The Shilla (Delhi’s Maurya, Mumbai’s Maratha Krishnaraj Sagar Hotel at the Hotels & Resorts to develop cross- and Chennai’s Park), Welcom Hotel Brindavan Garden in Mysore on an promotional opportunities for both (in Agra, Jaipur, Baroda and so on), annual lease amount of about Rs 60 companies. The tie-up lays stress on Fortune Park (consisting of standard lakh for a period of 15 years. The joint human resources, exchange of international hotels for businessmen hotel will now be rebranded as the loyalty programmes and joint invest- in business locations) and Welcom Royal Orchid Brindavan. Krishnaraj ments in establishing new hospital- Heritage (palaces, forts and resorts). Sagar is a heritage hotel in Mysore ity centres. Femena Hotels The company is embarking on Private Ltd plans Average Room Rates at End-March, 2006 expanding its presence in Europe. to open a three- (in Rs) The Indian Hotel Group is in touch star 100-room ho- City 2004-05 2005-06 Per cent change with various hotel groups in Lon- tel in Chennai at a don, Frankfurt and Paris for man- cost of Rs 150 Bangalore 7,880 11,100 41.00 agement arrangement, marketing crore. It is going Mumbai 4,955 6,450 30.17 alliance and academic acquisitions. to be completed by Delhi 5,200 7,050 35.57 During 2005, Indian Hotels had 2008. The hotel Kolkata 3,213 3,650 13.60 entered into a 30-year management will house a swim- contract to operate and manage ming pool, fitness Chennai 3,662 4,675 26.70 Pierre, a luxurious hotel in New club, conference Hyderabad 4,550 3,490 30.37 York. The hotel was earlier man- hall and Goa 3,764 5,000 33.00 aged by Four Seasons. multicuisine res- Jaipur 3,604 4,400 22.00 Taj Hotels manages about 60 ho- taurant. The Market Survey els across hotels in Goa. Under the monsoon package at the Grand In- tercontinental, a two-night stay in a sea-view suite costs around Rs 15,000 only including meals, sightseeing, airport transfers and more. The Federation of Hotel and Res- taurant Association of India has urged the Karnataka government to charge luxury tax on the actual room rates collected by hotels instead of charging it on the rack rate as being done now in Karnataka. The latest budget of Karnataka reverted to the The Leela, Goa old method of levying a luxury tax, which amounts to a tax at 12.5 per comprising 25 rooms. the country was around Rs 7000. This cent on the rack rate, and not on The Group will also launch Royal has doubled to Rs 14,000 per day. In what is actually charged. This is Orchid Central comprising 70 rooms cities like Bangalore, Agra and treated as a retrograde step not in in Jaipur and Hyderabad by the end Jaipur, the room rates are as high as line with the tourism policy. Of of 2006. Both these properties are Rs 18,000 per day. In Delhi, in July course, the Andhra Pradesh govern- four-star hotels targeting corporate 2006, the rate was around Rs 7500 ment levies a luxury tax of 5 per cent travellers. per day. In Bangalore, the demand- on the published tariff. Vadodara-based Sayaji Hotels is supply gap is large, and hence the Hotels are becoming eco-friendly. planning to set up a chain of 100 rates are high. For instance, the ITC Welcomgroup restaurants across major cities of By December 2005, Bangalore is going beyond government-laid India. The company will invest Rs emerged as the most expensive city guidelines on environment-friendli- 500 million for its nationwide chain for hotel rooms among the main business. Rainwater harvesting has been of restaurants. The main target ness and leisure destinations. In Oc- in existence in all ITC hotels since customers are the young families tober 2005, the average room rate in 1990. belonging to middle- and higher- the city was up 32 per cent year-on- The Rs 23.5 million water sew- income groups. year. age plant installed at Delhi’s ITC The Ashok Hotel, the first gov- was recovered in a short period of 18 ernment-owned and probably the Measures needed months. Also, the water usage has first five-star hotel in India, came into been reduced by 30 per cent over the being in 1956. It has now 550 rooms India needs more budget hotels. last four to five years. This treated and 111 suites. A notable feature of We do not have adequate number of water is being used by the hotel for the hotel is its thematic suites: the quality hotel rooms available at af- the air-conditioning plant, in the Neelam suite, the Kashmir suite, the fordable rates. This is a serious prob- washrooms (for flushing) and for its Mughal suite and the Assam suite. lem because domestic tourism is gardens. Foreign hotel chains that already growing at around 40 per cent per In Hyderabad, the surplus re- have a presence in India are plan- year. Experts say that even if the cycled water from an ITC hotel is ning to tie-up hotels in metros like capacity in this segment is multi- being offered to the local municipal- Bangalore and Hyderabad, and in plied ten times, it will still be inad- ity, while such a surplus from the smaller cities to meet a sharply grow- equate. One should not forget the ITC hotel in Bangalore is being used ing demand. arrival of low-cost airlines. for the construction activity of an- Goa is attracting more and more other ITC hotel in the city. Eco- Room rents tourists. Most of the hotels like In- friendly methods are adopted even tercontinental are offering monsoon at the construction stage. Average room rents registered a discounts, which make the accom- The hotel industry deserves sops rise of 20 to 25 per cent in just one modation at these hotels affordable. as its progress contributes not only year (June 2005 to June 2006). The The domestic tourists are unable to to employment generation but to the average room rent breached $400- visit Goa during the peak season due growth of the tourism industry. The level for the first time in cities like to non-availability of rooms and high demand for hotel rooms is seasonal. Bangalore. tariffs. The monsoon packages have Government policy should take this Earlier, the average rate across resulted in the rising occupancy lev- into account.

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