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www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
Research
Contents
Editorial 2
National Capital Region 3
(NCR)
Jaipur 5
Kolkata 7
Mumbai 9
Pune 11
Goa 13
Bangalore 15
Hyderabad 17
Chennai 19
Kochi 21
Conclusion 23
India Hotel ReviewQuarter 2 2007
Executive summary
! Indian hotel sector is on a high growth path with the surge in business as well as leisure
travellers in the country
! Foreign arrivals growing at a steady rate of 11-15% p.a. and are expected to grow
further with increased investment in the tourism sector
! Approximately 30,000 rooms in the premium segment entailing an investment around
Rs.428 billion are expected to come up in the top 10 cites of India
! Significant shortage of rooms across all categories in the country
! Mid-end and budget hotels presenting a potential growth opportunity
! Increased interest by foreign hotel brands and investors
The Oberoi Udaivilas, Udaipur
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200702 03
National Capital Region (NCR)
Overview
NCR, including the national capital New Delhi and the satellite towns of Faridabad, Gurgaon, Noida and
Ghaziabad, is a prime economic zone of India. A great historical past, gateway to the northern India hill
stations, excellent national and international connectivity makes the region one of the most favoured
destination for trade, commerce, politics and tourism.
Rapidly improving infrastructure, widespread economic activities, availability of skilled manpower and
decentralisation policy of urban development has triggered off further growth of the NCR. Widening of
national highways and expressways, launch of the Delhi Metro Project and growth of the IT/ITES sector
have also contributed to the boom in the real estate sector which has led to increased business trips to the
capital.
The growth of the industrial and service sector in NCR has led to a surge in demand for star category hotels
and this has had a positive impact on the hospitality business. Besides being a major transitional point for
international and domestic tourists, the region also witnesses an inflow of both business and leisure
travellers. This is unlike other metros, which predominantly host business travellers. Foreign business
travellers form around 70% of the corporate clientele of the hotels in NCR.
EditorialThe economic boom in the country continues unabated. With the GDP of the current fiscal expected to
cross the 9% mark, a consumption boom is sweeping the country, corporate earnings are showing an
impressive growth momentum, new job opportunities continue to unfold salaries and disposable
incomes continue to rise rowth is not just limited to the bigger cities but also permeating to smaller
towns and cities and with rampant urbanisation taking place the real estate sector is riding high.
and
. G
The phenomenal growth of the service sector has had a direct impact on the real estate sector. According to
Knight Frank estimates, close to 100 mn.sq.ft. of office space will be developed in the country over the next
two years, 80% of which will be taken up by the IT/ITES sector. Besides this, approximately
120 mn.sq.ft. of mall space will come up in the market by 2008. Another segment which is benefitting from
the growth of the service sector is the hotel industry. Liberalisation of the Indian economy coupled with the
growth in domestic business and a buoyant economic outlook has led to an enhancement in business travel
in India.
According to Government of India estimates, the foreign arrivals in India increased by 11% between 2004
and 2005 and by 15% between 2005 and 2006. More than 50% of this number are foreign business
travellers. Besides this, approximately 300 million domestic travellers traverse the country each year and this
number is expected to witness a growth of 10-15% over the next few years. Also, the efforts made by the
Ministry of Tourism & Culture in the last few years have had a salutary effect on India's tourism industry.
As per a survey undertaken by an international travel magazine in 2006, India has been ranked as the
4th most favoured country for holidays, above South Africa and Switzerland. Coupled with this, availability
of low cost medical facilities and the introduction of low cost airlines are all expected to generate increased
demand for hotel rooms across many cities in India.
A study done by Knight Frank India indicates that, currently there are close to 31,000 rooms across the
five-star deluxe, five-star, four-star and categories in the cities of NCR, Jaipur, Kolkata, Mumbai,
Pune, Goa, Bangalore, Hyderabad, Chennai and Kochi. Besides this, about 30,000 new rooms in the same
categories are in planning or under-construction stage in the aforesaid cities and will be ready by 2008-09.
The study also revealed that in 2006, the average occupancy rate across these ten cities in the mentioned
categories was 74.5% and the Average Room Rate was about Rs.7,800. About 75% of the total guests
were domestic while the rest were foreigners. Also, approximately 60% of the total guests coming to these
hotels are business travellers. The ARR realised from the business travellers was normally higher than those
from leisure travellers.
According to estimates there are close to 110,000 hotel rooms across all categories in India. This number is
abysmally low when compared to other countries of the world - China has 10 times more and United States
40 times more. Even New York metropolitan region has as many rooms as all of India. Hotel sector in India
has failed to keep up with the exponential economic growth and there exists a substantial demand-supply
gap. The result has been high room rates and low availability across major cities in India. There is an
immediate requirement of approximately 100,000 new hotel rooms but only 75% of that demand will be
met by the projects that are currently underway. Hospitality sector needs to be given a shot in the arm by
the government as well as by the private sector. There is a dire need for providing incentives like raising
Floor Area Ratio (FAR), providing land at subsidised rates, developing rooms in the mid and the budget
segment, etc. so as to facilitate the growth of this key sector.
heritage
(ARR)
Source: Knight Frank Research
Figure 3
10,000
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 4
85
80
75
70
65
60
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
Current Scenario
Over the last few years, tourism in NCR has grown to include heritage tourism, adventure tourism, medical
tourism and eco-tourism. Various segments, including the domestic as well as international corporate
travellers, bureaucrats, sportsmen as well as transitional tourists are the main clientele for the hospitality
sector.
Healthy industrial growth and better infrastructure, conducive for
trade events, have surged the business traffic, which has accelerated the demand for business hotels.
The current room inventory in all the categories in NCR is around 9,982 of which the premium category
hotels constitute around 85% or 8,532 rooms. The list includes names like ITC Maurya Sheraton,
Shangri-La, Trident and Taj Mahal Palace in the five-star deluxe category, Oberoi, Uppal Orchid and Imperial
Heritage in the five-star category, while the four-star category includes Hotel Janpath and Hotel Kanishka.
Between 2003 and 2005, the average occupancy rate in the NCR hotels grew from 70% to 78%. At
present, the occupancy rate is about 83%. Average Room Rate (ARR) in the region has gradually increased
from Rs.4,200 in 2003 to Rs.5,200 in 2004. However, ARR is expected to grow manifold and touch
Rs.10,000 by end-2007. Room rents contribute almost 60% of the total revenue generated in the hotels
while the Meetings, Incentives, Exhibitions and Conferences (MICE) segment accounts for approximately
15% of the total revenue. The share of Food & Beverage (F&B) sector is limited due to competition from
local restaurants and food chains.
NCR is expected to see many new hotels, service apartments and mixed-use developments over the next
3-4 years. Close to 25 new hotels are coming up in Gurgaon alone. Tie-ups with international players like
with , Emaar with Accor and DLF with Hilton is expected to give a push to the hotel industry
in NCR.
New Delhi, as the nation's capital, regularly hosts various political meets and also contributes to the
demand for hotel rooms in the region.
Hillwood Hyatt
Lemon Tree Hotel, Gurgaon Taj Palace Hotel, New Delhi
Source: Ministry of Tourism
Figure 1
5
4
3
2
1
0
2002
2003
2004
2005
Year
Foreign Arrivals in India
mill
ion
2006
Jaipur4%
Goa3% Pune
17%
Kolkata8%
Mumbai17%
Chennai10%
NCR17%
Kochi4%
Hyderabad10%
Bangalore10%
Distribution of supply by 2008-09
Total Rooms : 30,000
Source: Knight Frank Research
Figure 2
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200702 03
National Capital Region (NCR)
Overview
NCR, including the national capital New Delhi and the satellite towns of Faridabad, Gurgaon, Noida and
Ghaziabad, is a prime economic zone of India. A great historical past, gateway to the northern India hill
stations, excellent national and international connectivity makes the region one of the most favoured
destination for trade, commerce, politics and tourism.
Rapidly improving infrastructure, widespread economic activities, availability of skilled manpower and
decentralisation policy of urban development has triggered off further growth of the NCR. Widening of
national highways and expressways, launch of the Delhi Metro Project and growth of the IT/ITES sector
have also contributed to the boom in the real estate sector which has led to increased business trips to the
capital.
The growth of the industrial and service sector in NCR has led to a surge in demand for star category hotels
and this has had a positive impact on the hospitality business. Besides being a major transitional point for
international and domestic tourists, the region also witnesses an inflow of both business and leisure
travellers. This is unlike other metros, which predominantly host business travellers. Foreign business
travellers form around 70% of the corporate clientele of the hotels in NCR.
EditorialThe economic boom in the country continues unabated. With the GDP of the current fiscal expected to
cross the 9% mark, a consumption boom is sweeping the country, corporate earnings are showing an
impressive growth momentum, new job opportunities continue to unfold salaries and disposable
incomes continue to rise rowth is not just limited to the bigger cities but also permeating to smaller
towns and cities and with rampant urbanisation taking place the real estate sector is riding high.
and
. G
The phenomenal growth of the service sector has had a direct impact on the real estate sector. According to
Knight Frank estimates, close to 100 mn.sq.ft. of office space will be developed in the country over the next
two years, 80% of which will be taken up by the IT/ITES sector. Besides this, approximately
120 mn.sq.ft. of mall space will come up in the market by 2008. Another segment which is benefitting from
the growth of the service sector is the hotel industry. Liberalisation of the Indian economy coupled with the
growth in domestic business and a buoyant economic outlook has led to an enhancement in business travel
in India.
According to Government of India estimates, the foreign arrivals in India increased by 11% between 2004
and 2005 and by 15% between 2005 and 2006. More than 50% of this number are foreign business
travellers. Besides this, approximately 300 million domestic travellers traverse the country each year and this
number is expected to witness a growth of 10-15% over the next few years. Also, the efforts made by the
Ministry of Tourism & Culture in the last few years have had a salutary effect on India's tourism industry.
As per a survey undertaken by an international travel magazine in 2006, India has been ranked as the
4th most favoured country for holidays, above South Africa and Switzerland. Coupled with this, availability
of low cost medical facilities and the introduction of low cost airlines are all expected to generate increased
demand for hotel rooms across many cities in India.
A study done by Knight Frank India indicates that, currently there are close to 31,000 rooms across the
five-star deluxe, five-star, four-star and categories in the cities of NCR, Jaipur, Kolkata, Mumbai,
Pune, Goa, Bangalore, Hyderabad, Chennai and Kochi. Besides this, about 30,000 new rooms in the same
categories are in planning or under-construction stage in the aforesaid cities and will be ready by 2008-09.
The study also revealed that in 2006, the average occupancy rate across these ten cities in the mentioned
categories was 74.5% and the Average Room Rate was about Rs.7,800. About 75% of the total guests
were domestic while the rest were foreigners. Also, approximately 60% of the total guests coming to these
hotels are business travellers. The ARR realised from the business travellers was normally higher than those
from leisure travellers.
According to estimates there are close to 110,000 hotel rooms across all categories in India. This number is
abysmally low when compared to other countries of the world - China has 10 times more and United States
40 times more. Even New York metropolitan region has as many rooms as all of India. Hotel sector in India
has failed to keep up with the exponential economic growth and there exists a substantial demand-supply
gap. The result has been high room rates and low availability across major cities in India. There is an
immediate requirement of approximately 100,000 new hotel rooms but only 75% of that demand will be
met by the projects that are currently underway. Hospitality sector needs to be given a shot in the arm by
the government as well as by the private sector. There is a dire need for providing incentives like raising
Floor Area Ratio (FAR), providing land at subsidised rates, developing rooms in the mid and the budget
segment, etc. so as to facilitate the growth of this key sector.
heritage
(ARR)
Source: Knight Frank Research
Figure 3
10,000
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 4
85
80
75
70
65
60
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
Current Scenario
Over the last few years, tourism in NCR has grown to include heritage tourism, adventure tourism, medical
tourism and eco-tourism. Various segments, including the domestic as well as international corporate
travellers, bureaucrats, sportsmen as well as transitional tourists are the main clientele for the hospitality
sector.
Healthy industrial growth and better infrastructure, conducive for
trade events, have surged the business traffic, which has accelerated the demand for business hotels.
The current room inventory in all the categories in NCR is around 9,982 of which the premium category
hotels constitute around 85% or 8,532 rooms. The list includes names like ITC Maurya Sheraton,
Shangri-La, Trident and Taj Mahal Palace in the five-star deluxe category, Oberoi, Uppal Orchid and Imperial
Heritage in the five-star category, while the four-star category includes Hotel Janpath and Hotel Kanishka.
Between 2003 and 2005, the average occupancy rate in the NCR hotels grew from 70% to 78%. At
present, the occupancy rate is about 83%. Average Room Rate (ARR) in the region has gradually increased
from Rs.4,200 in 2003 to Rs.5,200 in 2004. However, ARR is expected to grow manifold and touch
Rs.10,000 by end-2007. Room rents contribute almost 60% of the total revenue generated in the hotels
while the Meetings, Incentives, Exhibitions and Conferences (MICE) segment accounts for approximately
15% of the total revenue. The share of Food & Beverage (F&B) sector is limited due to competition from
local restaurants and food chains.
NCR is expected to see many new hotels, service apartments and mixed-use developments over the next
3-4 years. Close to 25 new hotels are coming up in Gurgaon alone. Tie-ups with international players like
with , Emaar with Accor and DLF with Hilton is expected to give a push to the hotel industry
in NCR.
New Delhi, as the nation's capital, regularly hosts various political meets and also contributes to the
demand for hotel rooms in the region.
Hillwood Hyatt
Lemon Tree Hotel, Gurgaon Taj Palace Hotel, New Delhi
Source: Ministry of Tourism
Figure 1
5
4
3
2
1
0
2002
2003
2004
2005
Year
Foreign Arrivals in India
mill
ion
2006
Jaipur4%
Goa3% Pune
17%
Kolkata8%
Mumbai17%
Chennai10%
NCR17%
Kochi4%
Hyderabad10%
Bangalore10%
Distribution of supply by 2008-09
Total Rooms : 30,000
Source: Knight Frank Research
Figure 2
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200704 05
With the upcoming Commonwealth Games to be held in New Delhi in 2010, NCR is expected to witness
the inflow of around 0.8 million international tourists and nearly 3.6 million domestic tourists. To
accommodate these visitors approximately 30,000 rooms will be required in 2010. Around 6-8 hotels have
been additionally planned for athletes in the Games Village, in the vicinity of the Commonwealth Games
site in East Delhi.
Due to the availability of larger land parcels and proximity to expressways and ring roads, new hotels are
coming up in the peripheral locations of the city. Majority of the new supply is coming up in the business
hubs of Gurgaon and Noida. In the next couple of years, Noida will have additional 24 hotel projects. Once
the upcoming Medicity at Gurgaon is operational, the location will become a global health-care destination
and this will further give a boost to the demand for hotel rooms. Knight Frank Research indicates that over
the next few years, the supply of hotel rooms in NCR will cross 17,500. Out of this, around 5,100 rooms
are currently under construction and the rest in planning stages at various locations around the region.
To meet the long-stay demand from the corporate segment, service apartments have mushroomed in the
NCR at a frenzied pace. According to Knight Frank Research, approximately 1,000 service apartments will
be available in the region by 2008. Among the local developers, Enkay was the first developer to initiate this
concept in New Delhi. Major hotels groups like Marriott, Oberoi, Oakwood, Westin, Leela, Claridges and
Crowne Plaza are also planning service apartments in NCR. Besides these, many smaller and unbranded
service apartments are also coming up in Gurgaon and Noida. These also clock a year-round occupancy
and an average stay of 2.5 to 3 weeks, reflecting the high demand for such developments.
Due to high land cost and with a view to mitigate risk, the concept of hotels in malls is also flourishing.
Budget hotels in malls which offer shopping experience with entertainment facilities under one roof are
eliciting attention from various hospitality players. An upcoming five-star hotel in East End Mall in
Ghaziabad is one such example.
Entry of international brands and players, international events and multi-national companies setting up and
expanding operations has driven the growth of hospitality business in NCR. Soaring land prices and
substantial initial investment are no longer the deterrents for this sector. Due to encouraging government
policies like entitlement to duty-free imports floated by the government, the segment has availed
considerable capital in the market. Recent transactions while auctioning the hotel plots, at prices which are
three-fold of the reserved prices, show growing interest of investors in the region.
A five-year tax holiday announced in the recent budget by the Finance Ministry for two, three and four-star
hotels and convention centres specifically catering to the Commonwealth Games in Delhi, Gurgaon,
Ghaziabad and Faridabad is expected to initiate more hotel groups to venture into this real estate segment.
With the advent of international players, the NCR market is expected to grow towards global standards.
Public private sector initiatives, undertaken in joint venture with developers like Unitech and Parsvanath, in
order to promote entertainment and tourism industry along with infrastructure development in a diversified
quantum has set the region to witness growth in the hospitality sector in the forthcoming years.
Outlook
Jaipur
Overview
Jaipur, the capital of the state of Rajasthan, is a growing business centre of North India. The city offers an
array of attractions ranging from historical monuments and palaces, parks and gardens, gems and jewellery
business to emerging IT/ITES destination. The city's age-old charm along with growing modernisation
makes it an interesting package for a traveller.
Together with the north Indian cities of Delhi and Agra, Jaipur is the third city of the 'Golden Triangle'. It has
been one of the key tourist destinations of India and has the unique flavour of traditional hospitality of the
regal empire. Excellent connectivity to New Delhi through rail, road and air has cemented Jaipur's position
as a leading tourist location of the country.
In the last 2-3 years, Jaipur has undergone substantial changes which have altered the real estate landscape
of the city. Low operational costs, availability of labour at economical rates, low attrition rates due to lack of
regional competition have induced many IT/ITES companies to explore the city. As a result, the residential,
office and retail sector real estate have seen unprecedented growth. Large-scale projects like the Mahindra
& Mahindra SEZ, Vatika City, Pearl City, Omaxe City and many other corporate parks and malls are being
developed around the city.
Source: Knight Frank Research
Figure 5
10,000
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
12,000
Minimum Maximum
Source: Knight Frank Research
Figure 6
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 7
70
65
60
55
50
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
Current Scenario
Major demand drivers for the hospitality sector in Jaipur are heritage tourism and cultural tourism. Festivals
like Dusshehra, Pushkar Mela and Diwali take place in October and November and these months comprise
the peak season for tourist arrivals. Around 67% of the total tourists coming to the city are international
travellers whereas domestic travellers constitute 33%. The government has taken positive steps to promote
tourism and to bridge the gap between demand and supply for tourist amenities including accommodation
and leisure activities.
Penetration of the IT industry in Jaipur has given fillip to business tourism as well. A demand for business
hotels with facilities such as convention halls equipped with presentation equipments, board rooms and
lounges has been observed in the city. Jaipur has also been a favourite destination for marriages and theme
parties and this also contributes to substantial room demand during the period September to March.
The total inventory of the hotel segment in Jaipur in all the categories is about 2,655 rooms. Of this,
approximately 1,144 are in the five and five-star deluxe category, 352 in the four-star category and around
367 rooms in the heritage category. Some of the major hotels include Hotel Rambagh Palace (Bhawani
Singh Road), Le Meridian (Delhi Road), Rajputana Palace Sheraton (near the railway station) and
Country Inns & Suites (MI Road) in the five-star and five-star deluxe category, Hotel Gold Palace & Resorts
(Delhi Road) and Fortune's Bella Casa (Ashram Marg, Tonk Road) in the four-star category and Raj Mahal
Palace (Sardar Patel Marg), Raj Palace (Amer Road) in the heritage category.
The occupancy levels that were around 61% in 2004, increased to 63% in 2005 and to about 65% in 2006.
Significantly, Hotel Jai Mahal Palace enjoyed the highest occupancy rate of 72% i .
It is expected that the occupancy rates for hotels in Jaipur will continue to move upwards as the clientele
from the corporate sector is expected to increase.
n December 2006
The Gold Palace and Resorts, Amer Road Rambagh Palace, Bhavani Singh Road
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200704 05
With the upcoming Commonwealth Games to be held in New Delhi in 2010, NCR is expected to witness
the inflow of around 0.8 million international tourists and nearly 3.6 million domestic tourists. To
accommodate these visitors approximately 30,000 rooms will be required in 2010. Around 6-8 hotels have
been additionally planned for athletes in the Games Village, in the vicinity of the Commonwealth Games
site in East Delhi.
Due to the availability of larger land parcels and proximity to expressways and ring roads, new hotels are
coming up in the peripheral locations of the city. Majority of the new supply is coming up in the business
hubs of Gurgaon and Noida. In the next couple of years, Noida will have additional 24 hotel projects. Once
the upcoming Medicity at Gurgaon is operational, the location will become a global health-care destination
and this will further give a boost to the demand for hotel rooms. Knight Frank Research indicates that over
the next few years, the supply of hotel rooms in NCR will cross 17,500. Out of this, around 5,100 rooms
are currently under construction and the rest in planning stages at various locations around the region.
To meet the long-stay demand from the corporate segment, service apartments have mushroomed in the
NCR at a frenzied pace. According to Knight Frank Research, approximately 1,000 service apartments will
be available in the region by 2008. Among the local developers, Enkay was the first developer to initiate this
concept in New Delhi. Major hotels groups like Marriott, Oberoi, Oakwood, Westin, Leela, Claridges and
Crowne Plaza are also planning service apartments in NCR. Besides these, many smaller and unbranded
service apartments are also coming up in Gurgaon and Noida. These also clock a year-round occupancy
and an average stay of 2.5 to 3 weeks, reflecting the high demand for such developments.
Due to high land cost and with a view to mitigate risk, the concept of hotels in malls is also flourishing.
Budget hotels in malls which offer shopping experience with entertainment facilities under one roof are
eliciting attention from various hospitality players. An upcoming five-star hotel in East End Mall in
Ghaziabad is one such example.
Entry of international brands and players, international events and multi-national companies setting up and
expanding operations has driven the growth of hospitality business in NCR. Soaring land prices and
substantial initial investment are no longer the deterrents for this sector. Due to encouraging government
policies like entitlement to duty-free imports floated by the government, the segment has availed
considerable capital in the market. Recent transactions while auctioning the hotel plots, at prices which are
three-fold of the reserved prices, show growing interest of investors in the region.
A five-year tax holiday announced in the recent budget by the Finance Ministry for two, three and four-star
hotels and convention centres specifically catering to the Commonwealth Games in Delhi, Gurgaon,
Ghaziabad and Faridabad is expected to initiate more hotel groups to venture into this real estate segment.
With the advent of international players, the NCR market is expected to grow towards global standards.
Public private sector initiatives, undertaken in joint venture with developers like Unitech and Parsvanath, in
order to promote entertainment and tourism industry along with infrastructure development in a diversified
quantum has set the region to witness growth in the hospitality sector in the forthcoming years.
Outlook
Jaipur
Overview
Jaipur, the capital of the state of Rajasthan, is a growing business centre of North India. The city offers an
array of attractions ranging from historical monuments and palaces, parks and gardens, gems and jewellery
business to emerging IT/ITES destination. The city's age-old charm along with growing modernisation
makes it an interesting package for a traveller.
Together with the north Indian cities of Delhi and Agra, Jaipur is the third city of the 'Golden Triangle'. It has
been one of the key tourist destinations of India and has the unique flavour of traditional hospitality of the
regal empire. Excellent connectivity to New Delhi through rail, road and air has cemented Jaipur's position
as a leading tourist location of the country.
In the last 2-3 years, Jaipur has undergone substantial changes which have altered the real estate landscape
of the city. Low operational costs, availability of labour at economical rates, low attrition rates due to lack of
regional competition have induced many IT/ITES companies to explore the city. As a result, the residential,
office and retail sector real estate have seen unprecedented growth. Large-scale projects like the Mahindra
& Mahindra SEZ, Vatika City, Pearl City, Omaxe City and many other corporate parks and malls are being
developed around the city.
Source: Knight Frank Research
Figure 5
10,000
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
12,000
Minimum Maximum
Source: Knight Frank Research
Figure 6
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 7
70
65
60
55
50
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
Current Scenario
Major demand drivers for the hospitality sector in Jaipur are heritage tourism and cultural tourism. Festivals
like Dusshehra, Pushkar Mela and Diwali take place in October and November and these months comprise
the peak season for tourist arrivals. Around 67% of the total tourists coming to the city are international
travellers whereas domestic travellers constitute 33%. The government has taken positive steps to promote
tourism and to bridge the gap between demand and supply for tourist amenities including accommodation
and leisure activities.
Penetration of the IT industry in Jaipur has given fillip to business tourism as well. A demand for business
hotels with facilities such as convention halls equipped with presentation equipments, board rooms and
lounges has been observed in the city. Jaipur has also been a favourite destination for marriages and theme
parties and this also contributes to substantial room demand during the period September to March.
The total inventory of the hotel segment in Jaipur in all the categories is about 2,655 rooms. Of this,
approximately 1,144 are in the five and five-star deluxe category, 352 in the four-star category and around
367 rooms in the heritage category. Some of the major hotels include Hotel Rambagh Palace (Bhawani
Singh Road), Le Meridian (Delhi Road), Rajputana Palace Sheraton (near the railway station) and
Country Inns & Suites (MI Road) in the five-star and five-star deluxe category, Hotel Gold Palace & Resorts
(Delhi Road) and Fortune's Bella Casa (Ashram Marg, Tonk Road) in the four-star category and Raj Mahal
Palace (Sardar Patel Marg), Raj Palace (Amer Road) in the heritage category.
The occupancy levels that were around 61% in 2004, increased to 63% in 2005 and to about 65% in 2006.
Significantly, Hotel Jai Mahal Palace enjoyed the highest occupancy rate of 72% i .
It is expected that the occupancy rates for hotels in Jaipur will continue to move upwards as the clientele
from the corporate sector is expected to increase.
n December 2006
The Gold Palace and Resorts, Amer Road Rambagh Palace, Bhavani Singh Road
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
ARR values have increased by 27% during 2005 to around Rs.6,500 from Rs.5,100 reported in 2004.
Hotel Raj Vilas recorded the highest ARR of Rs.15,332 for the year 2006 while overall the premium category
hotels in Jaipur achieved an ARR of around Rs.7,200 in the same year. The demand supply imbalance
observed during the peak season has enabled hotels in Jaipur to charge higher tariffs across market
segments. With a nominal 3-4% p.a. increase in supply, ARR is expected to grow at a rate of 25-30% in the
next 2-3 years.
As per industry estimates, 56% of total hotel revenue is generated by room rents whereas F&B contributes
26% and convention and banquet halls each contribute approximately 8%. Due to the presence of
organised tour and travel operators, the international airport and introduction of new tourist attraction
concepts like Elephant Safari (Haathi Gaon), the city is bound to witness growth from budget to
premium-end clientele in hotel segment.
Strengthening of Jaipur as major tourist destination and a potential destination for business travellers has
induced foreign players like Amanda, Satinwoods, Banana Tree, Hampton Inns, Hilton and Mandarin
Oriental to consider the city for setting up new hotel projects. Hyatt has Jaipur on its priority list for
establishing its resort as well.
Other players like Mahindra Group is developing a five-star hotel while InterGlobe, in a joint venture with
Accor, is setting up a 500-room budget hotel in Jaipur, which will be operational by 2008. The construction
for another budget hotel by The Lemon Tree has already started at World Trade Park on Jawaharlal Nehru
Marg in Jaipur. An International Convention Centre is proposed in the city and is to come up within the
next 18 months. A distinct market of hotel-cum-mall segment is also emerging in the city. Fortune Group's
Bella Cassa, with an inventory of 57 rooms has been developed on the same concept.
Out of the Rs.200 billion investment envisaged in Rajasthan, Jaipur is expected to receive a major share
which will be invested for improving social infrastructure and amenities within the city. Better connectivity
to the city on account of low-cost airlines has led to increased consideration of the city as a venue for
conventions and marriages. It will further augment the share of room revenue in the total revenue
generation pie and also create new demand for rooms.
The New Hotel Policy 2006 gives special provisions for development of hotels in Jaipur. The policy includes
reservation of land parcels for hotel projects within the city, availability of hotels plots at a dropped reserved
price (almost 50% of commercial reserved price), 100% exemption on entertainment tax and 100%
exemption from land conversion charges. All these provisions are expected to increase the supply of hotels
in the city. Delhi Road due to the development of industrial parks, Ajmer Road on account of development
of integrated townships and SEZs and Tonk Road owing to new commercial developments, will be
emerging destinations for new hotel projects.
Jaipur, with its historical charm, will continue to attract international tourists and reap profits on the
growing hospitality business. With the city emerging as a major centre for gems, jewellery and textiles,
increased business for the hospitality segment will be coming in from this commercial segment. However,
a supply of approximately 1,080 rooms over the next few years may create a situation of over-supply in the
Jaipur hospitality market.
Outlook
Kolkata
Overview
Kolkata, the capital of West Bengal is the second largest city of India and an erstwhile trading and
commercial capital of the country. Various industrial set-ups including engineering products, leather, steel,
automobiles and pharmaceutical companies together with banking and insurance companies have had a
significant impact on the economic growth of the city. Kolkata is also the commercial capital of the
north-eastern region with most companies having their regional offices in the city.
The emergence of Kolkata as a popular new economy destination due to its advantages of comparatively
low manpower and real estate costs coupled with the existing industrial set-up have had major impact on
the real estate sector of the city. Geographically, too, the city has grown outward in all the directions with
major development along the eastern, southern as well as western locations. The growth of the IT/ITES
sector in the city is also triggering a growth phase in retail, hotels and residential properties. Kolkata, which
earlier had only a few hotel brands, has seen a change of face with the emergence of the new age
companies in the city.
Connectivity from Kolkata to other Indian and international destinations by air is improving with the
addition of new airlines. As the only metropolitan city for the entire eastern belt of the country, Kolkata has
an extensive network of road and rail transportation facilities.
Source: Knight Frank Research
Figure 8
20,000
15,000
10,000
5,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Heri
tag
e
Category-wise ARR
Rs.
Minimum Maximum
Source: Knight Frank Research
Figure 9
5,000
4,000
3,000
2,000
1,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
6,000
Source: Knight Frank Research
Figure 10
100
60
40
20
0
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
80
06 07
Hyatt Regency, Salt Lake Oberoi Grand, Jawaharlal Nehru Road
Current Scenario
In recent times, the city's booming IT sector has led to the rise in demand for hotel rooms. There has been a
substantial increase in the demand for good quality short-stay accomodation from Indian as well as foreign
executives, as business in the city has improved after a lull of almost two decades. Almost 60-70% of guests
in the premium category are business travellers, with the airline crew contributing another 8-10% to the
total demand. The travellers to the city are mostly domestic but recently the share of international travellers
has gone up and most of the premium category hotels have an average of 40% foreigners as their clientele.
Currently, there are around 25-26 hotels in various categories operating in Kolkata. The current inventory in
the premium category is around 1,476 rooms, which is around 85% of the total rooms in Kolkata. Most of
the hotels like Taj Bengal, Oberoi Grand, Hotel Hindusthan International as well as The Kenilworth Hotel are
located in the CBD and hold the advantage of location and accessibility. Other hotels like Hyatt Regency
Kolkata and ITC Sonar Bangla Sheraton Hotel & Towers in the eastern part of the city, cater to the
upcoming new business sectors along the Salt Lake and Rajarhat stretch.
The occupancy levels in the city hotels have increased at an average annual growth rate of 15-18% since
the last few years. The current average annual occupancy level of the city hovers around 80% and is
expected to remain at the same level for the next two years. Low ARR figures in 2001-03 were steadily
recovered in the last few years due to emergence of the IT/ITES sector, the change in the ARR of a city being
the indicator of the quantum of business activity. The premium category hotels currently have an ARR of
Rs.4,100- 5,500 with five-star deluxe hotels touching around Rs.12,000 in the recent past.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
ARR values have increased by 27% during 2005 to around Rs.6,500 from Rs.5,100 reported in 2004.
Hotel Raj Vilas recorded the highest ARR of Rs.15,332 for the year 2006 while overall the premium category
hotels in Jaipur achieved an ARR of around Rs.7,200 in the same year. The demand supply imbalance
observed during the peak season has enabled hotels in Jaipur to charge higher tariffs across market
segments. With a nominal 3-4% p.a. increase in supply, ARR is expected to grow at a rate of 25-30% in the
next 2-3 years.
As per industry estimates, 56% of total hotel revenue is generated by room rents whereas F&B contributes
26% and convention and banquet halls each contribute approximately 8%. Due to the presence of
organised tour and travel operators, the international airport and introduction of new tourist attraction
concepts like Elephant Safari (Haathi Gaon), the city is bound to witness growth from budget to
premium-end clientele in hotel segment.
Strengthening of Jaipur as major tourist destination and a potential destination for business travellers has
induced foreign players like Amanda, Satinwoods, Banana Tree, Hampton Inns, Hilton and Mandarin
Oriental to consider the city for setting up new hotel projects. Hyatt has Jaipur on its priority list for
establishing its resort as well.
Other players like Mahindra Group is developing a five-star hotel while InterGlobe, in a joint venture with
Accor, is setting up a 500-room budget hotel in Jaipur, which will be operational by 2008. The construction
for another budget hotel by The Lemon Tree has already started at World Trade Park on Jawaharlal Nehru
Marg in Jaipur. An International Convention Centre is proposed in the city and is to come up within the
next 18 months. A distinct market of hotel-cum-mall segment is also emerging in the city. Fortune Group's
Bella Cassa, with an inventory of 57 rooms has been developed on the same concept.
Out of the Rs.200 billion investment envisaged in Rajasthan, Jaipur is expected to receive a major share
which will be invested for improving social infrastructure and amenities within the city. Better connectivity
to the city on account of low-cost airlines has led to increased consideration of the city as a venue for
conventions and marriages. It will further augment the share of room revenue in the total revenue
generation pie and also create new demand for rooms.
The New Hotel Policy 2006 gives special provisions for development of hotels in Jaipur. The policy includes
reservation of land parcels for hotel projects within the city, availability of hotels plots at a dropped reserved
price (almost 50% of commercial reserved price), 100% exemption on entertainment tax and 100%
exemption from land conversion charges. All these provisions are expected to increase the supply of hotels
in the city. Delhi Road due to the development of industrial parks, Ajmer Road on account of development
of integrated townships and SEZs and Tonk Road owing to new commercial developments, will be
emerging destinations for new hotel projects.
Jaipur, with its historical charm, will continue to attract international tourists and reap profits on the
growing hospitality business. With the city emerging as a major centre for gems, jewellery and textiles,
increased business for the hospitality segment will be coming in from this commercial segment. However,
a supply of approximately 1,080 rooms over the next few years may create a situation of over-supply in the
Jaipur hospitality market.
Outlook
Kolkata
Overview
Kolkata, the capital of West Bengal is the second largest city of India and an erstwhile trading and
commercial capital of the country. Various industrial set-ups including engineering products, leather, steel,
automobiles and pharmaceutical companies together with banking and insurance companies have had a
significant impact on the economic growth of the city. Kolkata is also the commercial capital of the
north-eastern region with most companies having their regional offices in the city.
The emergence of Kolkata as a popular new economy destination due to its advantages of comparatively
low manpower and real estate costs coupled with the existing industrial set-up have had major impact on
the real estate sector of the city. Geographically, too, the city has grown outward in all the directions with
major development along the eastern, southern as well as western locations. The growth of the IT/ITES
sector in the city is also triggering a growth phase in retail, hotels and residential properties. Kolkata, which
earlier had only a few hotel brands, has seen a change of face with the emergence of the new age
companies in the city.
Connectivity from Kolkata to other Indian and international destinations by air is improving with the
addition of new airlines. As the only metropolitan city for the entire eastern belt of the country, Kolkata has
an extensive network of road and rail transportation facilities.
Source: Knight Frank Research
Figure 8
20,000
15,000
10,000
5,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Heri
tag
e
Category-wise ARR
Rs.
Minimum Maximum
Source: Knight Frank Research
Figure 9
5,000
4,000
3,000
2,000
1,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
6,000
Source: Knight Frank Research
Figure 10
100
60
40
20
0
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
80
06 07
Hyatt Regency, Salt Lake Oberoi Grand, Jawaharlal Nehru Road
Current Scenario
In recent times, the city's booming IT sector has led to the rise in demand for hotel rooms. There has been a
substantial increase in the demand for good quality short-stay accomodation from Indian as well as foreign
executives, as business in the city has improved after a lull of almost two decades. Almost 60-70% of guests
in the premium category are business travellers, with the airline crew contributing another 8-10% to the
total demand. The travellers to the city are mostly domestic but recently the share of international travellers
has gone up and most of the premium category hotels have an average of 40% foreigners as their clientele.
Currently, there are around 25-26 hotels in various categories operating in Kolkata. The current inventory in
the premium category is around 1,476 rooms, which is around 85% of the total rooms in Kolkata. Most of
the hotels like Taj Bengal, Oberoi Grand, Hotel Hindusthan International as well as The Kenilworth Hotel are
located in the CBD and hold the advantage of location and accessibility. Other hotels like Hyatt Regency
Kolkata and ITC Sonar Bangla Sheraton Hotel & Towers in the eastern part of the city, cater to the
upcoming new business sectors along the Salt Lake and Rajarhat stretch.
The occupancy levels in the city hotels have increased at an average annual growth rate of 15-18% since
the last few years. The current average annual occupancy level of the city hovers around 80% and is
expected to remain at the same level for the next two years. Low ARR figures in 2001-03 were steadily
recovered in the last few years due to emergence of the IT/ITES sector, the change in the ARR of a city being
the indicator of the quantum of business activity. The premium category hotels currently have an ARR of
Rs.4,100- 5,500 with five-star deluxe hotels touching around Rs.12,000 in the recent past.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
Kolkata is becoming a preferred location for conferences and seminars due to the relatively easy availability
of space at a lower cost as compared to other metros. Banqueting facilities in hotels witnessed a booking
level of almost 80% in 2006 with larger demand from the corporate companies as compared to private
functions. Facilities like spas have a good demand in Kolkata as five-star deluxe hotels like the
Hyatt Regency, ITC Sonar Bangla as well as Oberoi Grand have exquisite spa facilities, most of them catering
to in-house guests as well as local residents.
Tourism takes a backseat in the room demand for hotels, as this segment in Kolkata is fairly seasonal. A
minimal 20% of the demand can be attributed to foreign as well as domestic tourists in Kolkata. While
rooms in the premium category contribute to almost 62% of the net revenue, the MICE segment contribute
almost 15% of the net revenue generated in hotels in Kolkata.
The horizontal expansion of the city limits in the eastern and north-eastern part of Kolkata, including
Rajarhat and Salt Lake, has seen many global IT companies setting up operations here. The proximity to the
airport, availability of large land parcels and upcoming industrial set-ups has fuelled the demand for hotels
to be located in this region. According to industry experts, Kolkata will witness a new supply of around
2,000-2,200 rooms of which approximately 80% will come up in this region.
At least 12 new hotels and serviced apartments will be entering the Kolkata market over the next few years.
While few hotels like The Ffort Radisson have expansion plans within their current facility, hotels chains like
Intercontinental Group, Marriott Hotels and Resorts, Hilton Group, Peerless Group, Sarovar Hotels, as well as
DLF in joint venture with Dubai-based Emaar Group are setting up five-star and five-star deluxe properties in
the city. On the other hand, hotels like Grand Great Eastern Hotel as well as MBD Airport Hotel are currently
under renovation and are expected to add to the upcoming supply of rooms.
The service apartment segment in Kolkata has still not been explored, but as the market matures, the
demand for medium to long-term stay options would increase. The continual demand from the IT/ITES
segment together with the manufacturing and processing industry will further strengthen the demand for
this segment in Kolkata. Few hotel groups like Intercontinental Group too have plans to set up service
apartments in Rajarhat. The concept of mall hotel, combining a star category hotel within a mall and
multiplex, was initiated with a 130-room star hotel at City Centre Mall, at Rajarhat.
Kolkata is currently undergoing an economic resurgence with the West Bengal government providing
aggressive incentive packed steps to attract investments. The government has identified IT as a priority
sector to be developed into a growth engine for the future. With its improving infrastructure, low cost of
operations and a proactive state government, Kolkata is well positioned to benefit from this growth in ITES
services. The promotion of large-scale IT and non-IT industries in West Bengal will further enhance the
demand for hotel rooms. Also large townships in various parts of the city planned by the government, in
joint venture with developers, have hotels within their projects.
Outlook
Mumbai
Overview
Mumbai, the capital city of state of Maharashtra, is a commercial megalopolis and also the financial capital
of the country. The city comprises an archipelago of seven islands amalgamated with the northern lands to
form down town South Mumbai, North Mumbai with suburbs, Navi Mumbai and Thane. Being well
connected to key global cities makes Mumbai a gateway to India.
Besides port related trade activities, Mumbai has also been the entertainment capital of India. Important
financial institutions like the Reserve Bank of India, the Bombay Stock Exchange, the National Stock
Exchange and the headquarters of many Indian corporates including a number of FMCG corporates are
located in Mumbai. It is also an important location for multi-national companies entering the Indian market.
Hospitality industry in Mumbai, based on the business mix, can be distinctly divided into two districts,
viz. South Mumbai and North Mumbai. South Mumbai hotels like Oberoi, Taj Mahal Palace & Tower,
Intercontinental The Grand, Taj President and Marine Plaza operate on a healthy mix of 20% of leisure
travellers and 80% of business travellers visiting the business districts of Nariman point, Fort, Ballard Estate
and Colaba. On the contrary, North Mumbai hotels like Grand Hyatt at Santacruz located close to the
domestic airport, The Leela Kempinski and ITC Grand Maratha in the vicinity of the international airport at
Andheri, Taj Lands End at Bandra as well as JW Marriott at Juhu cater chiefly to the corporate travellers.
These hotels operate on a business mix of airline crew (7-10%) and business travellers (90%) visiting the
Suburban Business Districts (SBD) of Bandra-Kurla, Andheri-Powai, Goregaon-Malad and the Peripheral
Business District (PBD) of Navi-Mumbai.
Source: Knight Frank Research
Figure 12
10,000
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 13
75
70
65
60
2003
2004
2005
Year
Occupancy RatePerc
en
t
2006
80
Source: Knight Frank Research
Figure 11
10,000
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
Minimum Maximum
08 09
JW Marriott, Juhu Taj Mahal Palace and Tower, Apollo Bunder
Current Scenario
Over the past year, approximately 40% of the estimated 4.4 million foreign arrivals to India visited Mumbai.
According to the Municipal Corporation of Greater Mumbai, the city has a floating population in the range
of 3-5 million, a large share of which is contributed by business travellers. Over the last 3 years, premium
hotels in Mumbai have witnessed healthy occupancy rates crossing 65%, which rose marginally to 72% in
2006. However, according to industry sources, Mumbai experienced a dip of about 10% in the months of
July and August in 2006, which can be attributed to the bomb blasts and heavy deluge in the city.
In 2006 the city's annual ARR in the premium category was Rs.8,942. North Mumbai hotels recorded ARR in
the range of Rs.5,832-11,000 and an average occupancy level of 72%. In comparison, South Mumbai
hotels achieved an annual ARR in range of Rs.7,339-10,652 with an exception of a heritage hotel which
touched a high of Rs.15,000. In the same period, the average annual occupancy level for South Mumbai
hotels was 71%.
The revenue share distribution across premium as well as four-star category of hotels in Mumbai city can be
broadly divided as 65-75% being generated from room revenue, 20-35% from F&B on account of
house-guests, walk-in head covers and banqueting while around 2-5% is generated from the miscellaneous
segment.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
Kolkata is becoming a preferred location for conferences and seminars due to the relatively easy availability
of space at a lower cost as compared to other metros. Banqueting facilities in hotels witnessed a booking
level of almost 80% in 2006 with larger demand from the corporate companies as compared to private
functions. Facilities like spas have a good demand in Kolkata as five-star deluxe hotels like the
Hyatt Regency, ITC Sonar Bangla as well as Oberoi Grand have exquisite spa facilities, most of them catering
to in-house guests as well as local residents.
Tourism takes a backseat in the room demand for hotels, as this segment in Kolkata is fairly seasonal. A
minimal 20% of the demand can be attributed to foreign as well as domestic tourists in Kolkata. While
rooms in the premium category contribute to almost 62% of the net revenue, the MICE segment contribute
almost 15% of the net revenue generated in hotels in Kolkata.
The horizontal expansion of the city limits in the eastern and north-eastern part of Kolkata, including
Rajarhat and Salt Lake, has seen many global IT companies setting up operations here. The proximity to the
airport, availability of large land parcels and upcoming industrial set-ups has fuelled the demand for hotels
to be located in this region. According to industry experts, Kolkata will witness a new supply of around
2,000-2,200 rooms of which approximately 80% will come up in this region.
At least 12 new hotels and serviced apartments will be entering the Kolkata market over the next few years.
While few hotels like The Ffort Radisson have expansion plans within their current facility, hotels chains like
Intercontinental Group, Marriott Hotels and Resorts, Hilton Group, Peerless Group, Sarovar Hotels, as well as
DLF in joint venture with Dubai-based Emaar Group are setting up five-star and five-star deluxe properties in
the city. On the other hand, hotels like Grand Great Eastern Hotel as well as MBD Airport Hotel are currently
under renovation and are expected to add to the upcoming supply of rooms.
The service apartment segment in Kolkata has still not been explored, but as the market matures, the
demand for medium to long-term stay options would increase. The continual demand from the IT/ITES
segment together with the manufacturing and processing industry will further strengthen the demand for
this segment in Kolkata. Few hotel groups like Intercontinental Group too have plans to set up service
apartments in Rajarhat. The concept of mall hotel, combining a star category hotel within a mall and
multiplex, was initiated with a 130-room star hotel at City Centre Mall, at Rajarhat.
Kolkata is currently undergoing an economic resurgence with the West Bengal government providing
aggressive incentive packed steps to attract investments. The government has identified IT as a priority
sector to be developed into a growth engine for the future. With its improving infrastructure, low cost of
operations and a proactive state government, Kolkata is well positioned to benefit from this growth in ITES
services. The promotion of large-scale IT and non-IT industries in West Bengal will further enhance the
demand for hotel rooms. Also large townships in various parts of the city planned by the government, in
joint venture with developers, have hotels within their projects.
Outlook
Mumbai
Overview
Mumbai, the capital city of state of Maharashtra, is a commercial megalopolis and also the financial capital
of the country. The city comprises an archipelago of seven islands amalgamated with the northern lands to
form down town South Mumbai, North Mumbai with suburbs, Navi Mumbai and Thane. Being well
connected to key global cities makes Mumbai a gateway to India.
Besides port related trade activities, Mumbai has also been the entertainment capital of India. Important
financial institutions like the Reserve Bank of India, the Bombay Stock Exchange, the National Stock
Exchange and the headquarters of many Indian corporates including a number of FMCG corporates are
located in Mumbai. It is also an important location for multi-national companies entering the Indian market.
Hospitality industry in Mumbai, based on the business mix, can be distinctly divided into two districts,
viz. South Mumbai and North Mumbai. South Mumbai hotels like Oberoi, Taj Mahal Palace & Tower,
Intercontinental The Grand, Taj President and Marine Plaza operate on a healthy mix of 20% of leisure
travellers and 80% of business travellers visiting the business districts of Nariman point, Fort, Ballard Estate
and Colaba. On the contrary, North Mumbai hotels like Grand Hyatt at Santacruz located close to the
domestic airport, The Leela Kempinski and ITC Grand Maratha in the vicinity of the international airport at
Andheri, Taj Lands End at Bandra as well as JW Marriott at Juhu cater chiefly to the corporate travellers.
These hotels operate on a business mix of airline crew (7-10%) and business travellers (90%) visiting the
Suburban Business Districts (SBD) of Bandra-Kurla, Andheri-Powai, Goregaon-Malad and the Peripheral
Business District (PBD) of Navi-Mumbai.
Source: Knight Frank Research
Figure 12
10,000
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 13
75
70
65
60
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
80
Source: Knight Frank Research
Figure 11
10,000
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
Minimum Maximum
08 09
JW Marriott, Juhu Taj Mahal Palace and Tower, Apollo Bunder
Current Scenario
Over the past year, approximately 40% of the estimated 4.4 million foreign arrivals to India visited Mumbai.
According to the Municipal Corporation of Greater Mumbai, the city has a floating population in the range
of 3-5 million, a large share of which is contributed by business travellers. Over the last 3 years, premium
hotels in Mumbai have witnessed healthy occupancy rates crossing 65%, which rose marginally to 72% in
2006. However, according to industry sources, Mumbai experienced a dip of about 10% in the months of
July and August in 2006, which can be attributed to the bomb blasts and heavy deluge in the city.
In 2006 the city's annual ARR in the premium category was Rs.8,942. North Mumbai hotels recorded ARR in
the range of Rs.5,832-11,000 and an average occupancy level of 72%. In comparison, South Mumbai
hotels achieved an annual ARR in range of Rs.7,339-10,652 with an exception of a heritage hotel which
touched a high of Rs.15,000. In the same period, the average annual occupancy level for South Mumbai
hotels was 71%.
The revenue share distribution across premium as well as four-star category of hotels in Mumbai city can be
broadly divided as 65-75% being generated from room revenue, 20-35% from F&B on account of
house-guests, walk-in head covers and banqueting while around 2-5% is generated from the miscellaneous
segment.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
At present, Mumbai hospitality market has an inventory of around 6,829 rooms in the premium category,
including 404 service apartments. Around 5,150 rooms are coming up in the city by 2010. Increasing
economic and commercial activities in the city are putting a phenomenal upward pressure on the demand
for hotel rooms, leading to a demand-supply gap in the hospitality sector.
Skyrocketing land costs in South and Central Mumbai as well as the movement of business activity to
suburbs and Navi Mumbai has pushed the development of hospitality projects to North Mumbai.
Availability of large land parcels, economy of time and cost due to lesser commute time, proximity to
existing and proposed airports as well as a Quadra modal connectivity to Thane, Panvel, Pune and Nashik
have also been the reasons for extensive hospitality development in North Mumbai. Navi Mumbai too is
poised for considerable hospitality activity beginning with the Park Hotel becoming operational in the
current year. Another six hotels in the budget category are being planned in this micro-market.
Commercial re-development of mill lands in Central Mumbai is likely to add to the supply as well as to the
demand in hospitality sector in Mumbai. Once operational, hotels in this micro-market are likely to gain a
larger share of the business travellers frequenting the city. Four Seasons at Worli as well as High-Street
Phoenix, a part of a large-scale development at Lower Parel, are two prominent developments underway in
Central Mumbai.
Ease in availability of land together with increasing number of companies preferring to set up their
operations in SBD and PBD locations will continue to drive extensive hotel development in these
micro-markets. Moreover, proposed infrastructure projects like Bandra-Worli sea link, Metro Rail and
Nhava-Seva sea link promise enhanced connectivity and hence shall augment hospitality growth in these
corridors. Commencement of the new international airport at Navi-Mumbai leading to increased air
capacity and better connectivity shall also push the demand for hotel accommodation in North Mumbai.
The upsurge in hospitality sector is attracting several developers holding large land banks to foray into the
market by means of management contract tie-ups with hospitality majors. By joining hands with local
developers, global hospitality majors like Accor, Hilton, Four Seasons, IHG, Marriott, and domestic players
like Taj, Park and Sarovar groups are planning a new entry or expansion in the city. In a recent move,
Mumbai based developer Nirmal Lifestyles Group has announced the plans to develop India's largest single
hospitality precinct with around 1,080 hotel rooms spread across five hotels, and a 3,000-seater convention
centre at the central suburb of Mulund.
Corollary to the economic boom in the country, foreign as well as domestic business and leisure travellers
are expected to grow manifold. This will continue to fuel the demand for hotels in Mumbai and favour
strong hospitality sector growth in the medium term.
Outlook
Pune
Overview
Pune is strategically located in the heart of one of the richest industrial belts in Maharashtra. Proximity to
India's financial capital, Mumbai, and the presence of numerous automotive companies had for long been
Pune's claim to fame in the industrial world. Availability of skilled personnel and infrastructure facilities have
also played a major role in attracting industries to Pune. With the promotion of Mumbai-Pune region as a
'knowledge corridor' by Maharashtra government, the IT/ITES sector has also seen a substantial growth in
this city.
With the entry of many Indian and global software players in Pune since 2000, the city has seen around
12-15% per annual increase in foreign and domestic corporate travellers. Hotels of all categories in the city
have witnessed a steady stream of visitors, which has led them to add more services to their list as well as
upgrade their existing ones.
Source: Knight Frank Research
Figure 15
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 16
100
60
40
20
0
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
80
Source: Knight Frank Research
Figure 14
20,000
15,000
10,000
5,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
Sta
r
Category-wise ARR
Rs.
Minimum Maximum
10 11
Seasons Service Apartments, Aundh
Current Scenario
Currently there are around 28-30 hotels and 4-5 service apartment projects operating in Pune in all
categories. The premium category hotels total to around 1,020 rooms and three-star category to around
375. Most of the hotels strategically located in the central parts of the city have easy access to the airport
and railway station as well as to the industrial units and IT locations of the city. While
Le Meridien and Sun 'n' Sand are located on Bund Garden Road, other five-star hotels like
Best Western Pride and Taj Blue Diamond are located on University Road and Koregaon Road respectively.
Four-star hotels like Central Park, Arora Towers and Sagar Plaza are located in central Pune as well whereas
Ambience Excellency is located in the northern suburbs of Pimpri-Chinchwad. Seasons, a newly launched
service apartment project is located at Aundh in the west while others like Bel-Air are located in eastern
Pune.
The five-star and five-star deluxe hotels comprising around 27% of the existing stock in the city cater to
around 85% of business travellers while the four-star category hotels dominate the market with 37% of the
current stock catering to around 80% of business travellers, the rest being leisure travellers. Presently,
foreign business visitors account for almost 60% of total visitors to the city. The manufacturing and
automobile units in Pimpri-Chinchwad as well Chakan and Ranjangaon Industrial areas contribute to an
average of 55% of the total room demand while the IT sector in the city contributes 45%. The airline transit
crew generates around 2-3% of room nights annually in few four-star hotels.
Hotel in the premium category in Pune observed a marginal decrease in the average occupancy from
approximately 84% in 2005 to 81% in 2006. The average occupancy is expected to remain constant at
around 83-85% for the next few years till the opening of new properties in Pune after which the occupancy
levels may fall by almost 3-5% and remain constant thereafter.
The average room rates for premium category hotels in the city have shown a constant increase by almost
55% annually in the past few years. The ARR achieved by premium hotels in Pune is around Rs.6,800. This
trend is likely to continue for a few years due to limited supply of additional hotel rooms in the market.
five-star deluxe hotels
like
Taj Blue Diamond, Koregaon Road
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
At present, Mumbai hospitality market has an inventory of around 6,829 rooms in the premium category,
including 404 service apartments. Around 5,150 rooms are coming up in the city by 2010. Increasing
economic and commercial activities in the city are putting a phenomenal upward pressure on the demand
for hotel rooms, leading to a demand-supply gap in the hospitality sector.
Skyrocketing land costs in South and Central Mumbai as well as the movement of business activity to
suburbs and Navi Mumbai has pushed the development of hospitality projects to North Mumbai.
Availability of large land parcels, economy of time and cost due to lesser commute time, proximity to
existing and proposed airports as well as a Quadra modal connectivity to Thane, Panvel, Pune and Nashik
have also been the reasons for extensive hospitality development in North Mumbai. Navi Mumbai too is
poised for considerable hospitality activity beginning with the Park Hotel becoming operational in the
current year. Another six hotels in the budget category are being planned in this micro-market.
Commercial re-development of mill lands in Central Mumbai is likely to add to the supply as well as to the
demand in hospitality sector in Mumbai. Once operational, hotels in this micro-market are likely to gain a
larger share of the business travellers frequenting the city. Four Seasons at Worli as well as High-Street
Phoenix, a part of a large-scale development at Lower Parel, are two prominent developments underway in
Central Mumbai.
Ease in availability of land together with increasing number of companies preferring to set up their
operations in SBD and PBD locations will continue to drive extensive hotel development in these
micro-markets. Moreover, proposed infrastructure projects like Bandra-Worli sea link, Metro Rail and
Nhava-Seva sea link promise enhanced connectivity and hence shall augment hospitality growth in these
corridors. Commencement of the new international airport at Navi-Mumbai leading to increased air
capacity and better connectivity shall also push the demand for hotel accommodation in North Mumbai.
The upsurge in hospitality sector is attracting several developers holding large land banks to foray into the
market by means of management contract tie-ups with hospitality majors. By joining hands with local
developers, global hospitality majors like Accor, Hilton, Four Seasons, IHG, Marriott, and domestic players
like Taj, Park and Sarovar groups are planning a new entry or expansion in the city. In a recent move,
Mumbai based developer Nirmal Lifestyles Group has announced the plans to develop India's largest single
hospitality precinct with around 1,080 hotel rooms spread across five hotels, and a 3,000-seater convention
centre at the central suburb of Mulund.
Corollary to the economic boom in the country, foreign as well as domestic business and leisure travellers
are expected to grow manifold. This will continue to fuel the demand for hotels in Mumbai and favour
strong hospitality sector growth in the medium term.
Outlook
Pune
Overview
Pune is strategically located in the heart of one of the richest industrial belts in Maharashtra. Proximity to
India's financial capital, Mumbai, and the presence of numerous automotive companies had for long been
Pune's claim to fame in the industrial world. Availability of skilled personnel and infrastructure facilities have
also played a major role in attracting industries to Pune. With the promotion of Mumbai-Pune region as a
'knowledge corridor' by Maharashtra government, the IT/ITES sector has also seen a substantial growth in
this city.
With the entry of many Indian and global software players in Pune since 2000, the city has seen around
12-15% per annual increase in foreign and domestic corporate travellers. Hotels of all categories in the city
have witnessed a steady stream of visitors, which has led them to add more services to their list as well as
upgrade their existing ones.
Source: Knight Frank Research
Figure 15
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 16
100
60
40
20
0
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
80
Source: Knight Frank Research
Figure 14
20,000
15,000
10,000
5,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
Sta
r
Category-wise ARR
Rs.
Minimum Maximum
10 11
Seasons Service Apartments, Aundh
Current Scenario
Currently there are around 28-30 hotels and 4-5 service apartment projects operating in Pune in all
categories. The premium category hotels total to around 1,020 rooms and three-star category to around
375. Most of the hotels strategically located in the central parts of the city have easy access to the airport
and railway station as well as to the industrial units and IT locations of the city. While
Le Meridien and Sun 'n' Sand are located on Bund Garden Road, other five-star hotels like
Best Western Pride and Taj Blue Diamond are located on University Road and Koregaon Road respectively.
Four-star hotels like Central Park, Arora Towers and Sagar Plaza are located in central Pune as well whereas
Ambience Excellency is located in the northern suburbs of Pimpri-Chinchwad. Seasons, a newly launched
service apartment project is located at Aundh in the west while others like Bel-Air are located in eastern
Pune.
The five-star and five-star deluxe hotels comprising around 27% of the existing stock in the city cater to
around 85% of business travellers while the four-star category hotels dominate the market with 37% of the
current stock catering to around 80% of business travellers, the rest being leisure travellers. Presently,
foreign business visitors account for almost 60% of total visitors to the city. The manufacturing and
automobile units in Pimpri-Chinchwad as well Chakan and Ranjangaon Industrial areas contribute to an
average of 55% of the total room demand while the IT sector in the city contributes 45%. The airline transit
crew generates around 2-3% of room nights annually in few four-star hotels.
Hotel in the premium category in Pune observed a marginal decrease in the average occupancy from
approximately 84% in 2005 to 81% in 2006. The average occupancy is expected to remain constant at
around 83-85% for the next few years till the opening of new properties in Pune after which the occupancy
levels may fall by almost 3-5% and remain constant thereafter.
The average room rates for premium category hotels in the city have shown a constant increase by almost
55% annually in the past few years. The ARR achieved by premium hotels in Pune is around Rs.6,800. This
trend is likely to continue for a few years due to limited supply of additional hotel rooms in the market.
five-star deluxe hotels
like
Taj Blue Diamond, Koregaon Road
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
Due to the ever-rising demand from the corporate sector for quality banqueting facilities for corporate
functions, most of the hotels have at least 3-4 large and well-equipped banquet halls.
Out of the net revenue generated in all segments in hotels in Pune, rooms in the premium category
contribute almost 72% of the net revenue, the F&B segment contributes a substantial 27% of which
restaurants and the MICE segment contribute 7% and 20% respectively.
For close to a decade, no new hotel brands have entered Pune. However, since the last year close to 20 new
hotels across all categories are planning to set up properties in Pune. Around 55% of the upcoming
properties in Pune are five-star properties, the rest being four-star and budgets hotels The eastern suburb of
Pune along Nagar Road-Kharadi and Magarpatta will witness the launch of around 3-4 hotels in the
premium category by international hotel groups like the Hyatt, Marriott Hotels, Starwood Hotels and
national-level groups like Shalimar Hotels.
Other locations like Lohegaon and Yerwada would have a concentration of around 5-6 new hotels, all in the
five-star category, including the Leela and JW Marriott. Nagar Road itself would get more than 350 rooms
with hotels by Shalimar and Hyatt coming up here. Also groups like Royal Orchid Hotel, Orchid Hotel and
Sayaji Hotel plan to set up large-scale properties in various locations in Pune.
Central Pune will see the development of several five-star properties like the Marriott Convention Centre
and Radisson Hotel by Carlson Hospitality Group. Overall, the Pune market is expected to add 4,500-5,000
rooms across all categories by 2010-11.
Pune, with its growing IT/ITES sector, biotechnology parks, automobile and manufacturing units, along with
improved international air connectivity and readily available manpower is expected to have an inevitable
effect on all the real estate sectors including the hotel segment.
The potential for service apartments, due to the increase in number of expatriate professionals as well as
long-stay business travellers visiting Pune, has greatly increased. Most of the service apartment projects in
the city have occupancy levels as high as 80-85%. Some of the quality service apartment projects in Pune
include Golden Nest, Bel Air, Beverly Hills and Seasons. The success of Seasons located at Aundh has
prompted the Orchid Group to launch the second property on Nagar Road. Pune will also witness the
launch of two more service apartment projects managed by Oakwoods as well as a five-star service
apartment project by Hyatt. Though the concept of a spa resort is yet to pick up in Pune, Lavasa an
upcoming mega township has plans of setting a five-star spa resort by Accor Group. The upcoming heritage
hotel at Saswad by Orchid Group also plans to include spa facilities within the property.
With increased investments in all sectors in Pune and the number of hotels coming up in various pockets,
the profile of the city has changed significantly. Thus, with further increase in hotel activity, especially in the
premium-end segment by international and national groups, this sector in Pune is expected to witness an
increased interest for investment opportunities by various funds in the country.
Outlook
Goa
Overview
Goa, located on the western coastline, is a leading tourist destination of India. This state covers an area of
around 3,702 sq. kms. and is well connected with the nation by key transportation linkages. Besides
tourism, other sectors like shipping, mining as well as fishing have been key economic drivers for Goa.
Internationally renowned for its beaches, Goa handles around 12% of all foreign tourist arrivals to India and
has become one of the most popular holiday destinations for European travellers. Goa is divided into two
districts viz. North and South Goa, with headquarters at Panaji and Margao respectively. North Goa, owing
to its proximity to the state capital Panaji, has well developed infrastructure, corporate houses and is
frequented by tourists. The main lands of Panaji, Tiswadi and Bardez have witnessed extensive real estate
development in the past few years.
Goa has continuous stretches of land parcels along its 105 km. coastline, which are ideal for development of
hospitality projects. Moreover, the prevalent development control regulations fostered growth of only
hospitality sector developments along the coastline by not permitting any other real estate development
along the stretch. Taking the first mover advantage, major hospitality brands came up on prime stretches of
Miramar, Calangute, Baga and Candolim till Anjuna beach and the estuary of Mandovi River. Benefiting
from their location in North Goa the three properties of Taj in the region, viz. Aguada Fort, Aguada
Hermitage and Taj Village, besides other premium category of hotels like Cidade De Goa and Goa Marriott
enjoy equal share of business and leisure travellers. Goa has a current inventory of around 2,800 rooms in
the premium segment, which includes around 1,787 rooms in the five-star deluxe and 348 rooms in the
five-star category.
Source: Knight Frank Research
Figure 18
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
1,000
3,000
5,000
7,000
Source: Knight Frank Research
Figure 19
80
40
20
0
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
10
30
50
60
70
Source: Knight Frank Research
Figure 17
10,000
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
Minimum Maximum
12 13
Park Hyatt, Arossim Beach The Leela Kempinski Goa, Mabor Cavelossim
Current Scenario
The saturated North Goa market has pushed the later entrants to develop their premium star category
properties either further north from Arambol beach till the fringes of Sindhudurg district in Maharashtra or
along the virgin beaches of South Goa from Bogmalo till Palolem and Canacona. Resort properties of
Taj Exotica, Intercontinental The Grand, The Leela Goa, Park Hyatt, Ramada Caravela and Club Mahindra
are replete with a number of facilities ranging from water sports, casinos, salons, specialty restaurants and
even a mini golf course. Spa and ayurvedic centres are the latest additions to attract mid-market
international and up-market domestic clientele.
Hospitality industry in Goa, till the last decade, was predominantly dependent on charter operations during
October to April, which contributed 70% share of average revenue. However, at present, the contribution
of the charter market segment has reduced to 30% of average annual revenues. While the period of
October-April is considered the prime season, the period of May to mid October is considered off-season.
In the process of narrowing the gap between occupancy levels as well as ARR values between season and
off-season period, premium star category hotels are making a welcome shift from the matured charter
market segment and are promoting other emerging segments offering higher operating margins.
A shift in demand from budget to premium star category hotels, even by the domestic leisure travellers in
Goa, has increased. There is a growing trend of conducting corporate off-sites, team building exercises and
conferences in premium hotels in Goa.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
Due to the ever-rising demand from the corporate sector for quality banqueting facilities for corporate
functions, most of the hotels have at least 3-4 large and well-equipped banquet halls.
Out of the net revenue generated in all segments in hotels in Pune, rooms in the premium category
contribute almost 72% of the net revenue, the F&B segment contributes a substantial 27% of which
restaurants and the MICE segment contribute 7% and 20% respectively.
For close to a decade, no new hotel brands have entered Pune. However, since the last year close to 20 new
hotels across all categories are planning to set up properties in Pune. Around 55% of the upcoming
properties in Pune are five-star properties, the rest being four-star and budgets hotels The eastern suburb of
Pune along Nagar Road-Kharadi and Magarpatta will witness the launch of around 3-4 hotels in the
premium category by international hotel groups like the Hyatt, Marriott Hotels, Starwood Hotels and
national-level groups like Shalimar Hotels.
Other locations like Lohegaon and Yerwada would have a concentration of around 5-6 new hotels, all in the
five-star category, including the Leela and JW Marriott. Nagar Road itself would get more than 350 rooms
with hotels by Shalimar and Hyatt coming up here. Also groups like Royal Orchid Hotel, Orchid Hotel and
Sayaji Hotel plan to set up large-scale properties in various locations in Pune.
Central Pune will see the development of several five-star properties like the Marriott Convention Centre
and Radisson Hotel by Carlson Hospitality Group. Overall, the Pune market is expected to add 4,500-5,000
rooms across all categories by 2010-11.
Pune, with its growing IT/ITES sector, biotechnology parks, automobile and manufacturing units, along with
improved international air connectivity and readily available manpower is expected to have an inevitable
effect on all the real estate sectors including the hotel segment.
The potential for service apartments, due to the increase in number of expatriate professionals as well as
long-stay business travellers visiting Pune, has greatly increased. Most of the service apartment projects in
the city have occupancy levels as high as 80-85%. Some of the quality service apartment projects in Pune
include Golden Nest, Bel Air, Beverly Hills and Seasons. The success of Seasons located at Aundh has
prompted the Orchid Group to launch the second property on Nagar Road. Pune will also witness the
launch of two more service apartment projects managed by Oakwoods as well as a five-star service
apartment project by Hyatt. Though the concept of a spa resort is yet to pick up in Pune, Lavasa an
upcoming mega township has plans of setting a five-star spa resort by Accor Group. The upcoming heritage
hotel at Saswad by Orchid Group also plans to include spa facilities within the property.
With increased investments in all sectors in Pune and the number of hotels coming up in various pockets,
the profile of the city has changed significantly. Thus, with further increase in hotel activity, especially in the
premium-end segment by international and national groups, this sector in Pune is expected to witness an
increased interest for investment opportunities by various funds in the country.
Outlook
Goa
Overview
Goa, located on the western coastline, is a leading tourist destination of India. This state covers an area of
around 3,702 sq. kms. and is well connected with the nation by key transportation linkages. Besides
tourism, other sectors like shipping, mining as well as fishing have been key economic drivers for Goa.
Internationally renowned for its beaches, Goa handles around 12% of all foreign tourist arrivals to India and
has become one of the most popular holiday destinations for European travellers. Goa is divided into two
districts viz. North and South Goa, with headquarters at Panaji and Margao respectively. North Goa, owing
to its proximity to the state capital Panaji, has well developed infrastructure, corporate houses and is
frequented by tourists. The main lands of Panaji, Tiswadi and Bardez have witnessed extensive real estate
development in the past few years.
Goa has continuous stretches of land parcels along its 105 km. coastline, which are ideal for development of
hospitality projects. Moreover, the prevalent development control regulations fostered growth of only
hospitality sector developments along the coastline by not permitting any other real estate development
along the stretch. Taking the first mover advantage, major hospitality brands came up on prime stretches of
Miramar, Calangute, Baga and Candolim till Anjuna beach and the estuary of Mandovi River. Benefiting
from their location in North Goa the three properties of Taj in the region, viz. Aguada Fort, Aguada
Hermitage and Taj Village, besides other premium category of hotels like Cidade De Goa and Goa Marriott
enjoy equal share of business and leisure travellers. Goa has a current inventory of around 2,800 rooms in
the premium segment, which includes around 1,787 rooms in the five-star deluxe and 348 rooms in the
five-star category.
Source: Knight Frank Research
Figure 18
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
1,000
3,000
5,000
7,000
Source: Knight Frank Research
Figure 19
80
40
20
0
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
10
30
50
60
70
Source: Knight Frank Research
Figure 17
10,000
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
Minimum Maximum
12 13
Park Hyatt, Arossim Beach The Leela Kempinski Goa, Mabor Cavelossim
Current Scenario
The saturated North Goa market has pushed the later entrants to develop their premium star category
properties either further north from Arambol beach till the fringes of Sindhudurg district in Maharashtra or
along the virgin beaches of South Goa from Bogmalo till Palolem and Canacona. Resort properties of
Taj Exotica, Intercontinental The Grand, The Leela Goa, Park Hyatt, Ramada Caravela and Club Mahindra
are replete with a number of facilities ranging from water sports, casinos, salons, specialty restaurants and
even a mini golf course. Spa and ayurvedic centres are the latest additions to attract mid-market
international and up-market domestic clientele.
Hospitality industry in Goa, till the last decade, was predominantly dependent on charter operations during
October to April, which contributed 70% share of average revenue. However, at present, the contribution
of the charter market segment has reduced to 30% of average annual revenues. While the period of
October-April is considered the prime season, the period of May to mid October is considered off-season.
In the process of narrowing the gap between occupancy levels as well as ARR values between season and
off-season period, premium star category hotels are making a welcome shift from the matured charter
market segment and are promoting other emerging segments offering higher operating margins.
A shift in demand from budget to premium star category hotels, even by the domestic leisure travellers in
Goa, has increased. There is a growing trend of conducting corporate off-sites, team building exercises and
conferences in premium hotels in Goa.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
This has, in turn, increased the contribution of the MICE segment to the hospitality market revenues of Goa.
As per hotel industry sources, average occupancy in premium star category hotels is around 65%. While
occupancy levels in the months from mid October-January touches almost 78%, during the festive season
(December-January), occupancy levels fall just marginally short of 100%.
In 2006,Goa witnessed a dip in the charter market with a slight reduction in the occupancy levels, and this
was countered by increase in ARRs in order to augment the revenue generation. Foreign individual
travellers, group travellers, holiday packages and MICE segment accounted for medium occupancy
(55-60%) levels and ARRs in the range of Rs.5,000-7,000 during the second season of 2006, thus shrinking
the long-established off-season period. The occupancy levels in prime season of 2006 were 84% with ARRs
ranging from Rs.8,000-12,000. Thus the year 2006, witnessed an ARR of Rs.6,700. Inspite of the discount in
the ARRs offered to the charter market, this segment still has higher revenue contribution from F&B
(15-20 %) and miscellaneous segments .
Besides earmarking a budget of Rs. 200 million for marketing Goa globally, the state government of Goa
has been undertaking numerous initiatives to promote Goa as an emerging corporate destination. With the
development of Rajiv Gandhi IT Habitat, a 46-acre IT Park by the state government and five approved SEZ
projects the corporate scenario in Goa is expected to undergo a major facelift. This shall result in increased
demand for budget hotels and service apartments within Panaji, Dona Paula and various industrial belts.
The demand coming from the charter segment will be the major revenue earner for both the categories.
NRI and industrialist weddings are the latest addition to MICE segment with a revenue contribution of
7-10%. Besides the beaches, Goa also has world heritage architecture and rich flora-fauna to offer to
tourism supplementing untapped potential of heritage tourism, eco-tourism and medical tourism.
The ever increasing potential of the hospitality sector has been attracting investments from many of the
disparate industrial houses from Goa, shipping magnate Salgaonkar's being one of those who have
expanded their portfolio into the hospitality market by joining hands with Marriott. A number of hoteliers
are making entry into the Goa market by forming consortiums and joint ventures with real estate
developers and existing hoteliers. As per industry sources, the budget category of hotels will have supply of
about 250 new rooms in the forthcoming years. As opposed to this, around 980 rooms are being planned
in the premium category by 2010.
(5-10%)
Outlook
Bangalore
Overview
Bangalore, located on the southern Deccan Mysore plateau, is the principal administrative, commercial and
industrial centre of the state of Karnataka. Population-wise it is the fifth largest city of India and is hailed as
Asia's fastest growing cosmopolitan.
Bangalore is the nerve centre of the IT industry in India and is the world's fourth largest technology hub. It
is home to some of the largest national as well as international IT/ITES, R&D and technology companies of
the world. Bangalore has a fairly diverse portfolio of activities with firms manufacturing machine tools,
electronic products and auto-components, besides the IT sector. With more than 240 biotech firms having a
base in Bangalore, it is also a favoured biotechnology destination. All these varied business activities have
led to a phenomenal demand in the hospitality sector.
Bangalore has a host of reputed hotel chains ranging from deluxe hotels, heritage hotels, airport hotels to
budget hotels. However, given the current levels of available rooms in the city, only 60% of actual room
requirements are being catered to leaving a substantial demand-supply mismatch.
Source: Knight Frank Research
Figure 21
15,000
10,000
5,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 22
82
78
76
74
72
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
80
Source: Knight Frank Research
Figure 20
10,000
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Heri
tag
e
Category-wise ARR
Rs.
Minimum Maximum
12,000
14,000
16,000
14 15
The Leela Palace, Airport Road The Oberoi, Mahatma Gandhi Road
Current Scenario
Bangalore accounts for 51% of foreign business travellers visiting India annually. International corporate
travellers occupy almost 90% of the hotel rooms in Bangalore. Over the last couple of years, the city's
booming IT/ITES sector have been responsible for nearly 45-50% of the overall demand for rooms in the
city. There has been no significant change in the domestic and foreign business clientele in the five-star
category hotels owing to shortage of supply of rooms. However, there has been a sharp decline in the
number of leisure travellers visiting Bangalore. According to Knight Frank Research, since 2004 there has
been a slight shift in room demand from the premium segment to the budget segment due to the increase
in room rates.
Most of the five-star category hotels like Windsor Manor, Le Meridien and Grand Ashok are concentrated
along the Golf Course Road while four-star hotels like Oberoi and Taj Residency are located in the CBD of
MG Road. Few three and two-star hotels are located near the railway station catering to the domestic
travellers. However, most of the new hotels are coming up in the peripheral locations of Outer Ring Road
and Whitefield with a view to cater to the needs of the corporates locating in the new business locations of
the city.
Hospitality sector demand in Bangalore continues to be robust owing to the heightened commercial activity
in the city. Apart from this, medical tourists coming to Bangalore for inexpensive medical treatment are also
fuelling this demand. Bangalore has around 2,527 rooms in the premium category. This inventory is highly
deficient considering the growth rate of room demand in Bangalore.
The ARR in premium category hotels in Bangalore has recorded a growth of 18.5% at Rs.13,366 for the
nine-month period (April to December 2006) against Rs.11,280 in the corresponding period last year.
Significantly, the occupancy rate of hotels in Bangalore, currently at 75%, have been observed to have
declined marginally in the recent years.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
This has, in turn, increased the contribution of the MICE segment to the hospitality market revenues of Goa.
As per hotel industry sources, average occupancy in premium star category hotels is around 65%. While
occupancy levels in the months from mid October-January touches almost 78%, during the festive season
(December-January), occupancy levels fall just marginally short of 100%.
In 2006,Goa witnessed a dip in the charter market with a slight reduction in the occupancy levels, and this
was countered by increase in ARRs in order to augment the revenue generation. Foreign individual
travellers, group travellers, holiday packages and MICE segment accounted for medium occupancy
(55-60%) levels and ARRs in the range of Rs.5,000-7,000 during the second season of 2006, thus shrinking
the long-established off-season period. The occupancy levels in prime season of 2006 were 84% with ARRs
ranging from Rs.8,000-12,000. Thus the year 2006, witnessed an ARR of Rs.6,700. Inspite of the discount in
the ARRs offered to the charter market, this segment still has higher revenue contribution from F&B
(15-20 %) and miscellaneous segments .
Besides earmarking a budget of Rs. 200 million for marketing Goa globally, the state government of Goa
has been undertaking numerous initiatives to promote Goa as an emerging corporate destination. With the
development of Rajiv Gandhi IT Habitat, a 46-acre IT Park by the state government and five approved SEZ
projects the corporate scenario in Goa is expected to undergo a major facelift. This shall result in increased
demand for budget hotels and service apartments within Panaji, Dona Paula and various industrial belts.
The demand coming from the charter segment will be the major revenue earner for both the categories.
NRI and industrialist weddings are the latest addition to MICE segment with a revenue contribution of
7-10%. Besides the beaches, Goa also has world heritage architecture and rich flora-fauna to offer to
tourism supplementing untapped potential of heritage tourism, eco-tourism and medical tourism.
The ever increasing potential of the hospitality sector has been attracting investments from many of the
disparate industrial houses from Goa, shipping magnate Salgaonkar's being one of those who have
expanded their portfolio into the hospitality market by joining hands with Marriott. A number of hoteliers
are making entry into the Goa market by forming consortiums and joint ventures with real estate
developers and existing hoteliers. As per industry sources, the budget category of hotels will have supply of
about 250 new rooms in the forthcoming years. As opposed to this, around 980 rooms are being planned
in the premium category by 2010.
(5-10%)
Outlook
Bangalore
Overview
Bangalore, located on the southern Deccan Mysore plateau, is the principal administrative, commercial and
industrial centre of the state of Karnataka. Population-wise it is the fifth largest city of India and is hailed as
Asia's fastest growing cosmopolitan.
Bangalore is the nerve centre of the IT industry in India and is the world's fourth largest technology hub. It
is home to some of the largest national as well as international IT/ITES, R&D and technology companies of
the world. Bangalore has a fairly diverse portfolio of activities with firms manufacturing machine tools,
electronic products and auto-components, besides the IT sector. With more than 240 biotech firms having a
base in Bangalore, it is also a favoured biotechnology destination. All these varied business activities have
led to a phenomenal demand in the hospitality sector.
Bangalore has a host of reputed hotel chains ranging from deluxe hotels, heritage hotels, airport hotels to
budget hotels. However, given the current levels of available rooms in the city, only 60% of actual room
requirements are being catered to leaving a substantial demand-supply mismatch.
Source: Knight Frank Research
Figure 21
15,000
10,000
5,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 22
82
78
76
74
72
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
80
Source: Knight Frank Research
Figure 20
10,000
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Heri
tag
e
Category-wise ARR
Rs.
Minimum Maximum
12,000
14,000
16,000
14 15
The Leela Palace, Airport Road The Oberoi, Mahatma Gandhi Road
Current Scenario
Bangalore accounts for 51% of foreign business travellers visiting India annually. International corporate
travellers occupy almost 90% of the hotel rooms in Bangalore. Over the last couple of years, the city's
booming IT/ITES sector have been responsible for nearly 45-50% of the overall demand for rooms in the
city. There has been no significant change in the domestic and foreign business clientele in the five-star
category hotels owing to shortage of supply of rooms. However, there has been a sharp decline in the
number of leisure travellers visiting Bangalore. According to Knight Frank Research, since 2004 there has
been a slight shift in room demand from the premium segment to the budget segment due to the increase
in room rates.
Most of the five-star category hotels like Windsor Manor, Le Meridien and Grand Ashok are concentrated
along the Golf Course Road while four-star hotels like Oberoi and Taj Residency are located in the CBD of
MG Road. Few three and two-star hotels are located near the railway station catering to the domestic
travellers. However, most of the new hotels are coming up in the peripheral locations of Outer Ring Road
and Whitefield with a view to cater to the needs of the corporates locating in the new business locations of
the city.
Hospitality sector demand in Bangalore continues to be robust owing to the heightened commercial activity
in the city. Apart from this, medical tourists coming to Bangalore for inexpensive medical treatment are also
fuelling this demand. Bangalore has around 2,527 rooms in the premium category. This inventory is highly
deficient considering the growth rate of room demand in Bangalore.
The ARR in premium category hotels in Bangalore has recorded a growth of 18.5% at Rs.13,366 for the
nine-month period (April to December 2006) against Rs.11,280 in the corresponding period last year.
Significantly, the occupancy rate of hotels in Bangalore, currently at 75%, have been observed to have
declined marginally in the recent years.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
As the business travellers are the highest contributors to room demand, approximately all business hotels
provide exclusive amenities like Wi-fi, secretarial services, golf on request, etc. Out of the net revenue
generated in hotels, rooms in the premium category contribute almost 66% of the net revenue while the
F&B segment contributes a substantial 20%. Since Bangalore is not a leisure destination, the contribution of
the MICE segment is not very significant. This segment contributes around 10% of the total revenue.
The development of the new international airport project has attracted a number of hotel chains such as
Radisson, Hilton and JW Marriott to the city. This is with the anticipation that the number of international
travellers to the city will increase with the commencement of the new airport. Knight Frank Research
estimates that around 3,075 rooms in the premium category and the service apartment segment is likely to
be added to the city over the next five years.
The current limited hotel room inventory and a booming commercial market has driven existing hotels like
the ITC, the Taj, Oberoi, and the Capitol to come up with more properties along the Whitefield Road and
Outer Ring Road. Also international hotel chains like Hilton in joint venture with DLF, Accor with Emaar MGF
and Wyndham with Royal Orchid Hotel are also venturing into Bangalore's hospitality sector.
The government of Karnataka plans to encourage public-private partnership for developing tourism
infrastructure and to promote Bangalore as a destination for MICE by developing convention and exhibition
infrastructure facilities in the city. Plans are underway to offer government owned land at 50% of the
market value to entrepreneurs wishing to set up new resorts and hotels. Incentives in the form of tax
concessions are also being provided to domestic airlines and operators to encourage increased traffic to and
from the state.
In spite of a large amount of investment taking place in the city in the real estate sector, the infrastructure
has still a long way to go. The increase in the number of long-stay business travellers and limited number of
hotels has lured business travellers to service apartments both in terms of cost and comfort. Service
apartments such as Brigade Homestead on Lavelle Road and Prestige Oakwood in UB City on Vittal Mallya
Road offer stop-gap cost effective facilities for periods of extended stay.
The occupancy level in service apartments ranges between 80-90%. Companies like Infosys have set up an
in-house 500-room hotel complex for its clients and other visitors coming to Bangalore. International
groups like Oakwood, Marriott and Shangri-La have already tied up with local players to set up service
apartments in the city.
Thus, based on current macro economic trends and the business outlook, Bangalore will continue to
witness a stable trend in consumption, influenced by higher disposable income. The emergence of relatively
new markets and consistent demand for quality accommodation across most business destinations from
niche markets, such as the extended-stay segment, will ensure that the hotels in Bangalore have a required
base demand. Besides, foreign tourist inflow will enhance the popular leisure destinations in the city by
readily absorbing the future hotel developments, thus enabling a continuation in the present trend of value
appreciation.
Outlook
Hyderabad
Overview
Hyderabad, the erstwhile 'City of Nizams' is the capital of the southern state of Andhra Pradesh. Famed for
its princely monuments, Hyderabad has been one of the prime tourist centres of the country. In the recent
years, this city of historical significance has emerged as a favoured IT/ITES destination of India.
Good quality of life, low cost of living, rapid pace of infrastructure development and aggressive promotion
by the government has attracted the interest of national and international corporate entities to the city. The
post independence 'twin cities' image of Hyderabad-Secunderabad is being fast replaced with that of a
21st century modern, tech savvy image of Cyberabad.
Riding on the steady growth of the new economy sectors, the hospitality industry in the city is thriving with
healthy occupancy levels and consistent rise in demand. Prominent star category hospitality developments
in Hyderabad are concentrated around the Hussain Sagar Lake. The CBD location of Begumpet houses
five-star hotels like Ramada Manohar and ITC Kakatiya Sheraton while off-CBD location of Banjara Hills
houses three properties of the Taj Group. The 300-room Novotel Hotel managed by the Accor Group,
located at Hitec City, is the latest entrant to the premium hotel segment.
Source: Knight Frank Research
Figure 24
10,000
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 25
85
80
75
70
2003
2004
2005
Year
Occupancy RatePerc
en
t
2006
90
Source: Knight Frank Research
Figure 23
10,000
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
12,000
Minimum Maximum
16 17
Hyderabad Marriott, Tank Bund Road
Current Scenario
The hospitality industry in Hyderabad is upbeat with demand for hotels touching an all time high.
Currently, more than 85% of the clientele in five-star hotels in the city are from the corporate sector out of
which about 60% are foreign business travellers. Apart from this, there has also been a phenomenal
increase in domestic and international tourists to the city.
At present the city has 7 hotels in the five-star deluxe, five-star and heritage hotel category with a total
inventory of 1,646 rooms. Besides these, 3 four-star hotels totaling to around 290 rooms are also
operational in the city. The surge in demand has encouraged a number of star category hotels to carry out
expansion plans totaling to around 524 rooms. Taj Deccan located off Road No.1, Banjara Hills, is expected
to add around 200 rooms by 2008. Another five-star hotel, Hyderabad Marriott (formerly Viceroy), located
at Tank Bund Road, is undergoing expansion of its property. Post expansion the hotel shall have 308 rooms
by 2008.
Besides the above, over 7 five-star and five-star deluxe hotels are being developed across the city and will
result in supply of approximately 1,880 rooms. As most of the new supply is coming up in the premium
segment, the demand for rooms in the four-star category is still largely unmet. Of the new supply,
upcoming 4-star hotels will contribute around 570 rooms in the next 3-4 years.
Quite significantly, hotels in Hyderabad have recorded a 41% growth in ARRs, from Rs.4,649 in 2004 to
Rs.6,562 in 2005. Currently, the city has an ARR of around Rs.8,450. This can be attributed to the fact that
limited supply against demand came into the city in the premium segment during the period 2000-05.
Before the IT boom, the occupancies in the star hotels used to be in the range of 50-60% which has now
risen to an average of 80-83%.
Taj Krishna, Banjara Hills
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
As the business travellers are the highest contributors to room demand, approximately all business hotels
provide exclusive amenities like Wi-fi, secretarial services, golf on request, etc. Out of the net revenue
generated in hotels, rooms in the premium category contribute almost 66% of the net revenue while the
F&B segment contributes a substantial 20%. Since Bangalore is not a leisure destination, the contribution of
the MICE segment is not very significant. This segment contributes around 10% of the total revenue.
The development of the new international airport project has attracted a number of hotel chains such as
Radisson, Hilton and JW Marriott to the city. This is with the anticipation that the number of international
travellers to the city will increase with the commencement of the new airport. Knight Frank Research
estimates that around 3,075 rooms in the premium category and the service apartment segment is likely to
be added to the city over the next five years.
The current limited hotel room inventory and a booming commercial market has driven existing hotels like
the ITC, the Taj, Oberoi, and the Capitol to come up with more properties along the Whitefield Road and
Outer Ring Road. Also international hotel chains like Hilton in joint venture with DLF, Accor with Emaar MGF
and Wyndham with Royal Orchid Hotel are also venturing into Bangalore's hospitality sector.
The government of Karnataka plans to encourage public-private partnership for developing tourism
infrastructure and to promote Bangalore as a destination for MICE by developing convention and exhibition
infrastructure facilities in the city. Plans are underway to offer government owned land at 50% of the
market value to entrepreneurs wishing to set up new resorts and hotels. Incentives in the form of tax
concessions are also being provided to domestic airlines and operators to encourage increased traffic to and
from the state.
In spite of a large amount of investment taking place in the city in the real estate sector, the infrastructure
has still a long way to go. The increase in the number of long-stay business travellers and limited number of
hotels has lured business travellers to service apartments both in terms of cost and comfort. Service
apartments such as Brigade Homestead on Lavelle Road and Prestige Oakwood in UB City on Vittal Mallya
Road offer stop-gap cost effective facilities for periods of extended stay.
The occupancy level in service apartments ranges between 80-90%. Companies like Infosys have set up an
in-house 500-room hotel complex for its clients and other visitors coming to Bangalore. International
groups like Oakwood, Marriott and Shangri-La have already tied up with local players to set up service
apartments in the city.
Thus, based on current macro economic trends and the business outlook, Bangalore will continue to
witness a stable trend in consumption, influenced by higher disposable income. The emergence of relatively
new markets and consistent demand for quality accommodation across most business destinations from
niche markets, such as the extended-stay segment, will ensure that the hotels in Bangalore have a required
base demand. Besides, foreign tourist inflow will enhance the popular leisure destinations in the city by
readily absorbing the future hotel developments, thus enabling a continuation in the present trend of value
appreciation.
Outlook
Hyderabad
Overview
Hyderabad, the erstwhile 'City of Nizams' is the capital of the southern state of Andhra Pradesh. Famed for
its princely monuments, Hyderabad has been one of the prime tourist centres of the country. In the recent
years, this city of historical significance has emerged as a favoured IT/ITES destination of India.
Good quality of life, low cost of living, rapid pace of infrastructure development and aggressive promotion
by the government has attracted the interest of national and international corporate entities to the city. The
post independence 'twin cities' image of Hyderabad-Secunderabad is being fast replaced with that of a
21st century modern, tech savvy image of Cyberabad.
Riding on the steady growth of the new economy sectors, the hospitality industry in the city is thriving with
healthy occupancy levels and consistent rise in demand. Prominent star category hospitality developments
in Hyderabad are concentrated around the Hussain Sagar Lake. The CBD location of Begumpet houses
five-star hotels like Ramada Manohar and ITC Kakatiya Sheraton while off-CBD location of Banjara Hills
houses three properties of the Taj Group. The 300-room Novotel Hotel managed by the Accor Group,
located at Hitec City, is the latest entrant to the premium hotel segment.
Source: Knight Frank Research
Figure 24
10,000
8,000
6,000
4,000
2,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
Source: Knight Frank Research
Figure 25
85
80
75
70
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
90
Source: Knight Frank Research
Figure 23
10,000
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
12,000
Minimum Maximum
16 17
Hyderabad Marriott, Tank Bund Road
Current Scenario
The hospitality industry in Hyderabad is upbeat with demand for hotels touching an all time high.
Currently, more than 85% of the clientele in five-star hotels in the city are from the corporate sector out of
which about 60% are foreign business travellers. Apart from this, there has also been a phenomenal
increase in domestic and international tourists to the city.
At present the city has 7 hotels in the five-star deluxe, five-star and heritage hotel category with a total
inventory of 1,646 rooms. Besides these, 3 four-star hotels totaling to around 290 rooms are also
operational in the city. The surge in demand has encouraged a number of star category hotels to carry out
expansion plans totaling to around 524 rooms. Taj Deccan located off Road No.1, Banjara Hills, is expected
to add around 200 rooms by 2008. Another five-star hotel, Hyderabad Marriott (formerly Viceroy), located
at Tank Bund Road, is undergoing expansion of its property. Post expansion the hotel shall have 308 rooms
by 2008.
Besides the above, over 7 five-star and five-star deluxe hotels are being developed across the city and will
result in supply of approximately 1,880 rooms. As most of the new supply is coming up in the premium
segment, the demand for rooms in the four-star category is still largely unmet. Of the new supply,
upcoming 4-star hotels will contribute around 570 rooms in the next 3-4 years.
Quite significantly, hotels in Hyderabad have recorded a 41% growth in ARRs, from Rs.4,649 in 2004 to
Rs.6,562 in 2005. Currently, the city has an ARR of around Rs.8,450. This can be attributed to the fact that
limited supply against demand came into the city in the premium segment during the period 2000-05.
Before the IT boom, the occupancies in the star hotels used to be in the range of 50-60% which has now
risen to an average of 80-83%.
Taj Krishna, Banjara Hills
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
According to industry sources, it is not unusual to find the occupancy rate going up more than 90% in
weekdays during October to March. Over the next two years, occupancy rates are expected to remain
constant in the premium category hotels.
The new hotels coming up in the city include the Taj Falaknuma Palace at Falaknama Junction, Ista at
Gachibowli and Le Meridien at Ameerpeth. The Hyatt, being developed along Banjara Hills Road No.2 on a
3-acre land parcel, will have around 300 rooms by end-2007. Besides, Hilton will also come up with a
300-room hotel in the city. Meanwhile, Mumbai-based developers K Raheja Corp have included a premium
250-room hotel in their IT Park Mindspace at Hitec City, which will be operational in 2008.
Hyderabad is fast becoming a favoured MICE destination with a number of important events being
organised in the city. The prestigious convention of the Asian Development Bank was one of the events that
took place in the city in 2006. The industry is upbeat with several national and international events lined up
for this year as well. This is foreseen to translate into increased demand for the hospitality sector.
Hyderabad's increasing popularity as a destination for IT/ITES companies and a favoured venue for
important sports events, conventions and exhibitions, amongst others, portend well for the continued
growth in the hospitality industry. The industry expects further boost to the industry with the upcoming
international airport at Shamshabad, scheduled to be operational by 2009-10.
Besides the IT/ITES sector, promising trend in the sunrise sectors like biotechnology, pharmaceuticals and
growth in the medical tourism would also be essential demand drivers for hotel rooms. Moreover,
important developments like the Hyderabad International Convention Centre, the Genome Valley,
Hitec City, Financial District and ICICI Knowledge Park will continue to drive the demand in the hospitality
sector.
With the number of hotel rooms under development, supply in the premium hotel segment is expected to
grow at the rate of around 25% in the next five years in contrast to a complete lack of supply in the last five
years. However, there have been some reservations in industry quarters regarding the demand-supply
scenario. Many of the corporates present in the city are in the process of building their own guest-houses to
cater to their company's requirements, which can result in a possible over-supply situation.
Outlook
Source: Knight Frank Research
Figure 26
15,000
10,000
5,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
Minimum Maximum
18 19
Chennai
Overview
Chennai is the capital of the state of Tamil Nadu and India's fourth largest metropolitan city. Known for its
cultural heritage and temple architecture, Chennai is also one of the important commercial and industrial
destinations of India. The city is the base of about 40% of India's automobile industry and has also become
a major centre for high-end IT services and ITES outsourcing.
Chennai's diversified economic base, driven primarily by automobile, software services, hardware
manufacturing and financial services as well as other industries including petrochemicals, textiles and
apparel industries has resulted in the inflow of large number of business travellers to the city. Besides this,
being a port-city, trading also contributes greatly to its economy and makes it a transit point for sea-bound
travellers. The city is well connected internationally as well as to other parts of the country by all modes of
transport.
The current growth of the IT/ITES industry has triggered a growth phase in residential, commercial as well
as the hospitality industry. Business travellers have grown manifold since the last few years. To support the
accomodation demand, many business hotels as well as budget hotels have sprung up in the city along
with few five-star luxury hotels. Majority of the business of the existing hotels can be attributed to the
burgeoning IT/ITES sector in the city.
Source: Knight Frank Research
Figure 27
5,000
4,000
3,000
2,000
1,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
6,000
Source: Knight Frank Research
Figure 28
100
60
40
20
0
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
80
Fishermans Cove, East Coast Road Le Royal Meridien, GST Road
Current Scenario
Chennai has a host of reputed hotel chains in the five, five-star deluxe hotels and four-star categories. It has
around 22-23 hotels in the premium category with an inventory of around 3,570 rooms including
25 rooms in the heritage category. The city being a commercial destination, around 88% of the hotel
clientele are business travellers out of which the airline crew contributes around 10%. Leisure travellers
contribute a negligible 10% of the hotel room demand in the city. Currently Chennai hotel market is
concentrated around the CBD at Anna Salai, Cathedral Road as well as other locations like T Nagar and
GST Road. These include ITC Hotel Park Sheraton and Towers at TTK Road, The Park and Courtyard Marriott
at Anna Salai, Chola Sheraton at Cathedral Road, Trident Hilton Chennai at GST Road and GRT Grand at
T Nagar. Luxury hotels like Fisherman's Cove located on the East Coast Road mainly attract international
tourists and the upper-end domestic leisure travellers.
Chennai market has witnessed a gradual increase in occupancies 2002 onwards. The average occupancy of
premium grade hotels grew from 61% in 2003 to 76% in 2005. In 2006,the average occupancy of Chennai
reached 79% and this is expected to increase further at a steady rate over the medium term, till more new
hotels are launched and become operational in the city. In the last few years, with rise in demand,
Chennai's ARR has gone up by more than 15%. With recorded ARR of Rs.4,675 in 2005 and Rs.5,450 in
2006, the growth is expected to escalate further in the next few years.
Chennai attracts negligible leisure traffic, so this segment does not contribute significantly to the hotel
room demand. Also, as around 60% of the business travellers visiting Chennai are foreign corporate
travellers, facilities and amenities in the hotels are provided to match the high tariff costs. Room revenues
contribute around 60% of the net generated revenue while the MICE segment contributes around 30%.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
According to industry sources, it is not unusual to find the occupancy rate going up more than 90% in
weekdays during October to March. Over the next two years, occupancy rates are expected to remain
constant in the premium category hotels.
The new hotels coming up in the city include the Taj Falaknuma Palace at Falaknama Junction, Ista at
Gachibowli and Le Meridien at Ameerpeth. The Hyatt, being developed along Banjara Hills Road No.2 on a
3-acre land parcel, will have around 300 rooms by end-2007. Besides, Hilton will also come up with a
300-room hotel in the city. Meanwhile, Mumbai-based developers K Raheja Corp have included a premium
250-room hotel in their IT Park Mindspace at Hitec City, which will be operational in 2008.
Hyderabad is fast becoming a favoured MICE destination with a number of important events being
organised in the city. The prestigious convention of the Asian Development Bank was one of the events that
took place in the city in 2006. The industry is upbeat with several national and international events lined up
for this year as well. This is foreseen to translate into increased demand for the hospitality sector.
Hyderabad's increasing popularity as a destination for IT/ITES companies and a favoured venue for
important sports events, conventions and exhibitions, amongst others, portend well for the continued
growth in the hospitality industry. The industry expects further boost to the industry with the upcoming
international airport at Shamshabad, scheduled to be operational by 2009-10.
Besides the IT/ITES sector, promising trend in the sunrise sectors like biotechnology, pharmaceuticals and
growth in the medical tourism would also be essential demand drivers for hotel rooms. Moreover,
important developments like the Hyderabad International Convention Centre, the Genome Valley,
Hitec City, Financial District and ICICI Knowledge Park will continue to drive the demand in the hospitality
sector.
With the number of hotel rooms under development, supply in the premium hotel segment is expected to
grow at the rate of around 25% in the next five years in contrast to a complete lack of supply in the last five
years. However, there have been some reservations in industry quarters regarding the demand-supply
scenario. Many of the corporates present in the city are in the process of building their own guest-houses to
cater to their company's requirements, which can result in a possible over-supply situation.
Outlook
Source: Knight Frank Research
Figure 26
15,000
10,000
5,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
Minimum Maximum
18 19
Chennai
Overview
Chennai is the capital of the state of Tamil Nadu and India's fourth largest metropolitan city. Known for its
cultural heritage and temple architecture, Chennai is also one of the important commercial and industrial
destinations of India. The city is the base of about 40% of India's automobile industry and has also become
a major centre for high-end IT services and ITES outsourcing.
Chennai's diversified economic base, driven primarily by automobile, software services, hardware
manufacturing and financial services as well as other industries including petrochemicals, textiles and
apparel industries has resulted in the inflow of large number of business travellers to the city. Besides this,
being a port-city, trading also contributes greatly to its economy and makes it a transit point for sea-bound
travellers. The city is well connected internationally as well as to other parts of the country by all modes of
transport.
The current growth of the IT/ITES industry has triggered a growth phase in residential, commercial as well
as the hospitality industry. Business travellers have grown manifold since the last few years. To support the
accomodation demand, many business hotels as well as budget hotels have sprung up in the city along
with few five-star luxury hotels. Majority of the business of the existing hotels can be attributed to the
burgeoning IT/ITES sector in the city.
Source: Knight Frank Research
Figure 27
5,000
4,000
3,000
2,000
1,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
6,000
Source: Knight Frank Research
Figure 28
100
60
40
20
0
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
80
Fishermans Cove, East Coast Road Le Royal Meridien, GST Road
Current Scenario
Chennai has a host of reputed hotel chains in the five, five-star deluxe hotels and four-star categories. It has
around 22-23 hotels in the premium category with an inventory of around 3,570 rooms including
25 rooms in the heritage category. The city being a commercial destination, around 88% of the hotel
clientele are business travellers out of which the airline crew contributes around 10%. Leisure travellers
contribute a negligible 10% of the hotel room demand in the city. Currently Chennai hotel market is
concentrated around the CBD at Anna Salai, Cathedral Road as well as other locations like T Nagar and
GST Road. These include ITC Hotel Park Sheraton and Towers at TTK Road, The Park and Courtyard Marriott
at Anna Salai, Chola Sheraton at Cathedral Road, Trident Hilton Chennai at GST Road and GRT Grand at
T Nagar. Luxury hotels like Fisherman's Cove located on the East Coast Road mainly attract international
tourists and the upper-end domestic leisure travellers.
Chennai market has witnessed a gradual increase in occupancies 2002 onwards. The average occupancy of
premium grade hotels grew from 61% in 2003 to 76% in 2005. In 2006,the average occupancy of Chennai
reached 79% and this is expected to increase further at a steady rate over the medium term, till more new
hotels are launched and become operational in the city. In the last few years, with rise in demand,
Chennai's ARR has gone up by more than 15%. With recorded ARR of Rs.4,675 in 2005 and Rs.5,450 in
2006, the growth is expected to escalate further in the next few years.
Chennai attracts negligible leisure traffic, so this segment does not contribute significantly to the hotel
room demand. Also, as around 60% of the business travellers visiting Chennai are foreign corporate
travellers, facilities and amenities in the hotels are provided to match the high tariff costs. Room revenues
contribute around 60% of the net generated revenue while the MICE segment contributes around 30%.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200720 21
According to market estimates, ITC Park Sheraton has the highest room revenues amongst all hotels in
Chennai and captures almost 20% of the market.
Within the next few years, around 10-12 new hotels and service apartment projects with approximately
2,900 rooms in the premium category will be launched in Chennai. Few established groups like ITC and
the Taj Group are planning to add more new properties in the city. Other groups like Bharat Hotels,
Sarovar's Hometel Hotels as well as Leela Hotels have plans of establishing their name in the hospitality
market in Chennai.
Chennai hotel market is expected to see a steady growth in the medium to long term driven by an
expansion of the IT/ITES, biotech, automotive and the telecom sector. Old Mahabalipuram Road, being
developed as an IT corridor, as well as old industrial unit areas such as Guindy, Taramani, Ambattur and
Padi, are being converted into software technology parks. Presently, these locations do not have any major
hotel development. However a large catchment of IT/ITES companies and their captive boarding, lodging
and conference requirements will make these locations a viable business hotel market.
Large-scale IT developments along the Old Mahabalipuram Road as well as the development of the
Mahindra World City beyond the airport are changing the face of the real estate market in Chennai.
Also, with the infrastructure initiatives being undertaken by various local development bodies in Chennai,
the city is witnessing increased levels of interest as an attractive business destination in southern India.
Moreover, as the real estate market in the city is opening up and becoming more organised, participation of
national and international developers/funds in the development of IT parks, commercial buildings and
hospitality projects are likely to increase.
Thus, with the emergence of new business districts, the demand for hotel rooms to cater to the business
travellers will also increase. Besides, Chennai has a distinct advantage of having a long coastline, which can
be explored to develop leisure hotels, which will also serve to attract more leisure tourists in the city.
With the growing need for longer-stay options, the service apartment segment is another sector, which can
be explored in this segment. Though some service apartments exist in Chennai, there is an increased need
to develop these to their full potential on account of increasing demand from the IT/ITES segment together
with the manufacturing and processing industry. Some of the groups planning to enter this market segment
include Singapore-based service apartment major Ascott Group, which plans to develop a 200-room
project, and a few service apartment projects by Oakwood Group.
Outlook
Source: Knight Frank Research
Figure 29
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Heri
tag
e
Category-wise ARR
Rs.
Minimum Maximum
10,000
Kochi
Overview
Kochi is the commercial capital of the southern state of Kerala and has been an important port of India
since historic times. Being a coastal city, the economy of Kochi is driven by fisheries, shipping and allied
industries besides gold merchandising and export of spices. With the recent efforts by the Government of
Kerala to promote Kochi as an alternate IT/ITES destination, the investments in this sector are expected to
rise giving further boost to the city's as well as the state's economy.
The city acts as the gateway to Kerala by being well connected with the nation through all transportation
linkages. Kochi is a leisure destination and also acts as a transit point for the leisure travellers' onward to
backwater spots or hill stations. Over the years, Kochi has witnessed a change of clientele from leisure to
business travellers, with business travellers now constituting at least 50% of the total travellers to the city.
MG Road and Marine Drive, the key commercial locations of the city, have been the primary hub for
business hotels. Some of the major hotels in these locations are Taj Residency, Avenue Regent and
Gokulam Park Inn. Fort Kochi and Bolgatty, being major tourism spots have been favoured locations of
leisure hotels housing Malabar House and Bolgatty Palace, amongst other prominent hotels. Scarcity of vast
expanse of continuous land in these existing hospitality pockets, easy accessibility from the newly set-up
international airport at Nedumbassery, proximity to the emerging IT/ITES pockets of Kakkanad and
Kalamssery, have led new entrants to plan and launch premium star category hospitality projects at Maradu
and Kumbalam along NH-47 and its bye-pass.
Source: Knight Frank Research
Figure 30
5,000
4,000
3,000
2,000
1,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
6,000
Source: Knight Frank Research
Figure 31
68
66
64
62
2003
2004
2005
Year
Occupancy RatePerc
en
t
2006
70
Taj Malabar, Willingdon Island Le Meridien, Maradu
Current Scenario
As per industry estimates, Kochi had a 50-55% share of the total 7 million tourists coming to Kerala last
year. With the rapid expansion of the IT/ITES sector in the city, this share is likely to grow rapidly in the near
future. Currently, the hotel room demand generators are transit travellers and business travellers from the
shipping sector, marine and agro-export industries based in the city. BFSI and the telecom sectors have also
been significant contributors to demand in the past two years.
With an inventory size of about 988 rooms, Kochi experiences an acute shortage of rooms in peak season
(mid October-December). In 2006, the ARR achieved by five-star deluxe and five-star hotels was in the
range of Rs.3,575-5,700 while the ARR achieved by the heritage hotel was Rs.7,000. The four-star category
hotels achieved ARR in the range of Rs.2,800-3,000. Average occupancy level witnessed throughout the
year was 67%, with season (mid October-March) occupancy levels touching 70% leaving behind a
marginal gap of 5-7% less in slack season (April-mid October). The high occupancy levels in the city hotels
have been a result of major upsurge in the inflow of business travellers. This trend has continued even
during slack tourist season and created acute shortage of rooms during peak season.
Business travellers form approximately 80% of the clientele of hotels like Taj Residency on Marine Drive and
Gokulam Park Inn on MG Road. On the contrary, the heritage hotels in Fort Kochi like Malabar and
Brounton Boatyard have a significant share of leisure travellers as their clientele. Located close to the naval
base and shipyard, business hotels like Casino and Trident Hilton serve the corporate travelers in Willingdon
Island.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200720 21
According to market estimates, ITC Park Sheraton has the highest room revenues amongst all hotels in
Chennai and captures almost 20% of the market.
Within the next few years, around 10-12 new hotels and service apartment projects with approximately
2,900 rooms in the premium category will be launched in Chennai. Few established groups like ITC and
the Taj Group are planning to add more new properties in the city. Other groups like Bharat Hotels,
Sarovar's Hometel Hotels as well as Leela Hotels have plans of establishing their name in the hospitality
market in Chennai.
Chennai hotel market is expected to see a steady growth in the medium to long term driven by an
expansion of the IT/ITES, biotech, automotive and the telecom sector. Old Mahabalipuram Road, being
developed as an IT corridor, as well as old industrial unit areas such as Guindy, Taramani, Ambattur and
Padi, are being converted into software technology parks. Presently, these locations do not have any major
hotel development. However a large catchment of IT/ITES companies and their captive boarding, lodging
and conference requirements will make these locations a viable business hotel market.
Large-scale IT developments along the Old Mahabalipuram Road as well as the development of the
Mahindra World City beyond the airport are changing the face of the real estate market in Chennai.
Also, with the infrastructure initiatives being undertaken by various local development bodies in Chennai,
the city is witnessing increased levels of interest as an attractive business destination in southern India.
Moreover, as the real estate market in the city is opening up and becoming more organised, participation of
national and international developers/funds in the development of IT parks, commercial buildings and
hospitality projects are likely to increase.
Thus, with the emergence of new business districts, the demand for hotel rooms to cater to the business
travellers will also increase. Besides, Chennai has a distinct advantage of having a long coastline, which can
be explored to develop leisure hotels, which will also serve to attract more leisure tourists in the city.
With the growing need for longer-stay options, the service apartment segment is another sector, which can
be explored in this segment. Though some service apartments exist in Chennai, there is an increased need
to develop these to their full potential on account of increasing demand from the IT/ITES segment together
with the manufacturing and processing industry. Some of the groups planning to enter this market segment
include Singapore-based service apartment major Ascott Group, which plans to develop a 200-room
project, and a few service apartment projects by Oakwood Group.
Outlook
Source: Knight Frank Research
Figure 29
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Heri
tag
e
Category-wise ARR
Rs.
Minimum Maximum
10,000
Kochi
Overview
Kochi is the commercial capital of the southern state of Kerala and has been an important port of India
since historic times. Being a coastal city, the economy of Kochi is driven by fisheries, shipping and allied
industries besides gold merchandising and export of spices. With the recent efforts by the Government of
Kerala to promote Kochi as an alternate IT/ITES destination, the investments in this sector are expected to
rise giving further boost to the city's as well as the state's economy.
The city acts as the gateway to Kerala by being well connected with the nation through all transportation
linkages. Kochi is a leisure destination and also acts as a transit point for the leisure travellers' onward to
backwater spots or hill stations. Over the years, Kochi has witnessed a change of clientele from leisure to
business travellers, with business travellers now constituting at least 50% of the total travellers to the city.
MG Road and Marine Drive, the key commercial locations of the city, have been the primary hub for
business hotels. Some of the major hotels in these locations are Taj Residency, Avenue Regent and
Gokulam Park Inn. Fort Kochi and Bolgatty, being major tourism spots have been favoured locations of
leisure hotels housing Malabar House and Bolgatty Palace, amongst other prominent hotels. Scarcity of vast
expanse of continuous land in these existing hospitality pockets, easy accessibility from the newly set-up
international airport at Nedumbassery, proximity to the emerging IT/ITES pockets of Kakkanad and
Kalamssery, have led new entrants to plan and launch premium star category hospitality projects at Maradu
and Kumbalam along NH-47 and its bye-pass.
Source: Knight Frank Research
Figure 30
5,000
4,000
3,000
2,000
1,000
--
2003
2004
2005
Year
Movement in ARR
Rs.
2006
6,000
Source: Knight Frank Research
Figure 31
68
66
64
62
2003
2004
2005
Year
Occupancy Rate
Perc
en
t
2006
70
Taj Malabar, Willingdon Island Le Meridien, Maradu
Current Scenario
As per industry estimates, Kochi had a 50-55% share of the total 7 million tourists coming to Kerala last
year. With the rapid expansion of the IT/ITES sector in the city, this share is likely to grow rapidly in the near
future. Currently, the hotel room demand generators are transit travellers and business travellers from the
shipping sector, marine and agro-export industries based in the city. BFSI and the telecom sectors have also
been significant contributors to demand in the past two years.
With an inventory size of about 988 rooms, Kochi experiences an acute shortage of rooms in peak season
(mid October-December). In 2006, the ARR achieved by five-star deluxe and five-star hotels was in the
range of Rs.3,575-5,700 while the ARR achieved by the heritage hotel was Rs.7,000. The four-star category
hotels achieved ARR in the range of Rs.2,800-3,000. Average occupancy level witnessed throughout the
year was 67%, with season (mid October-March) occupancy levels touching 70% leaving behind a
marginal gap of 5-7% less in slack season (April-mid October). The high occupancy levels in the city hotels
have been a result of major upsurge in the inflow of business travellers. This trend has continued even
during slack tourist season and created acute shortage of rooms during peak season.
Business travellers form approximately 80% of the clientele of hotels like Taj Residency on Marine Drive and
Gokulam Park Inn on MG Road. On the contrary, the heritage hotels in Fort Kochi like Malabar and
Brounton Boatyard have a significant share of leisure travellers as their clientele. Located close to the naval
base and shipyard, business hotels like Casino and Trident Hilton serve the corporate travelers in Willingdon
Island.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200722 23
Around 80% of the net revenue of business hotels is generated from rooms, 12-15% from the F&B segment
and 3-5% from the miscellaneous segment. As opposed to this, tourist traffic and MICE segment in leisure
hotels segment generates about 35% of the total revenue from the F&B segment while 60% of the revenue
is generated from rooms.
Knight Frank Research indicates that in Kochi a total of 1,238 hotel rooms are being planned or are under
construction. Of this, about 215 rooms shall be available by end-2007 and the balance by 2009. Though
the new supply is substantial, it will not bridge the mounting demand. Brands and corporates developing
hospitality projects in Kochi include Ramada, Hyatt, Holiday Inn, Intercontinental, Banyan Tree, Muthoot
Group and Middle East Company.
Business travellers from the IT/ITES and financial corporates at the Kakkanad Thripunithara belt and
Kalamssery, transit travellers passing by NH-47 and its bye-pass are the expected target segment, leading to
development of all upcoming hospitality projects in the vicinity of these pockets.
A strong focus on infrastructure development, proactive measures to promote IT sector, commerce and
tourism and effectively marketing Kerala as an attractive business and leisure destination shall directly
impact the future of hospitality industry in the state. Development in the sector shall be governed by
successful enactment of long impending state tourism policy and development control regulations.
According to a recent report by the World Travel and Tourism Council, demand of travel and tourism in
Kerala is expected to witness an 11.6% growth p.a between 2004-14, higher than any country or state in
the world. The boom in commerce, industry, trade and tourism will directly impact the rise in demand for
hospitality sector. It shall further narrow the gap in season and slack season with augmented ARRs and
occupancy levels all throughout the year till 2008. The additional supply of rooms by 2009 is expected to
create a competitive market environment and shall stabilise the ARR values, which are currently on an
upswing.
Kerala, known worldwide for its back waters, hill stations, eco-tourism and beaches, also holds the potential
for health tourism. There is a need for looking at parallel avenues of revenue from other hospitality
segments viz. service apartments, MICE with focus on NRI weddings and conferences, besides marketing
the already flourishing business line of ayurvedic spas. These emerging segments can be expected to get
increased clientele by way of business travellers frequenting the city on account of growth in the IT/ITES
sector in the city.
Outlook
Heri
tag
e
Source: Knight Frank Research
Figure 32
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
Minimum Maximum
ConclusionThe Indian hotel sector is witnessing high demand on the back of growth in business opportunities and
increased domestic tourism. This has led to a wave of unprecedented room rate realisations and occupancy
levels. Going forward, on account of supply lag, we forsee the ARRs to increase by 18-20% over the next
two years. Once all the under-construction and planned supply is brought in the market, there would be a
stabilisation, both in ARRs as well as occupancy levels. Some markets like Hyderabad and Pune, where the
supply is expected to outpace demand, there can be a slight drop in ARRs before stabilisation is achieved.
As we move ahead, the Indian hotel industry will see the emergence of two key trends - the spread to the
smaller towns and cities and increased capacity creation in the mid-end and budget segment. The Indian
hotel sector network which was till now limited to the metros and few large cities of the country, will now
be seen encompassing the smaller cities (Tier-II and III) which are currently under widespread real estate
activity. Positive economic outlook for these centers has led developers to build land banks, many of which
will house hotel projects to service the demand created.
Rising land costs in the metros and the tier-I cities have been pushing up the projects costs of hotel
developments. This has been reflected in higher ARRs and the construction of luxury and premium segment
hotels. Heightened business travel emanating from all sectors has led to increase in demand for budget
hotels that provide quality and efficiency in service. This demand is more pronounced in the existing
business and commercial centers. However, the rising land values in these cities have led to questioning the
sustainability and feasibility of budget hotels here. The cities like Mumbai and NCR have the least number
of such hotels because of exorbitant land costs.
Realising the potential for branded mid-market product, numerous foreign and Indian chains are planning
economy segment hotels in India. Some of these are Formule 1 (JV between Accor and Emaar MGF), Keys
(Burrgruen Hotels), Red Fox Hotels(Lemon Tree), HomeTel (Sarovar Hotels), etc. Already one brand, the
Ginger Hotels by the Taj group is operational in Hardwar and Pune and new projects are planned in Mysore,
Trivandrum, Durgapur, Panjim, Agartala, Tirupur Pondicherry, Baddi and Nashik. So, in times to come, the
development opportunity for mid-market segment has plenty of room to grow.
As the hospitality sector moves ahead, it is witnessing the advent of niche segments like spas and service
apartments which were earlier considered as low growth segments. Although primarily located in Tier-I
cities like New Delhi, Mumbai and Bangalore, the rising demand is seeing them spread to Tier-II and Tier-III
cities. Popular service apartments in Mumbai include Taj Wellington Mews, Lakeside Chalet Marriott
Executive Apartments, Grand Hyatt Residence, etc. Star city has six such properties in Chennai and Seasons
provides quality accommodations in Pune. Accor and Marriott are looking at setting up such properties in
Bangalore, Chennai and Kochi.
Resorts have become more specialised over the years and offer everything from spas to alternate
rejuvenations treatments. Major hotel chains are introducing spas in their luxury and business hotels to tap
this demand, for example, Taj has created its own brand Jiva while some other hotels have tied up with
international spa brands like Banyan Tree. Stand alone spa resorts are also gaining prominence, like Ananda
in the Himalayas in Uttaranchal and Angsana spa and resort in Bangalore. With the growth in medical
tourism, this segment will get the requisite clientele to sustain.
The hotel sector in India does project great opportunities but a lot needs to be done in order to realise its
full potential. Declaring this sector as high priority industry for foreign direct investment has been a step in
the right direction. Though this has cleared the way for capital infusion in this sector, investors still find
bureaucratic rules, infrastructure limitations, complex business practices, corruption as roadblocks to doing
business in India. Given the price sensitivity, high land cost and long gestation period, what is required the
most are requisite policy changes by the government. Till that is done, investors and developers will be
hesitant to venture in this segment in a big way.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200722 23
Around 80% of the net revenue of business hotels is generated from rooms, 12-15% from the F&B segment
and 3-5% from the miscellaneous segment. As opposed to this, tourist traffic and MICE segment in leisure
hotels segment generates about 35% of the total revenue from the F&B segment while 60% of the revenue
is generated from rooms.
Knight Frank Research indicates that in Kochi a total of 1,238 hotel rooms are being planned or are under
construction. Of this, about 215 rooms shall be available by end-2007 and the balance by 2009. Though
the new supply is substantial, it will not bridge the mounting demand. Brands and corporates developing
hospitality projects in Kochi include Ramada, Hyatt, Holiday Inn, Intercontinental, Banyan Tree, Muthoot
Group and Middle East Company.
Business travellers from the IT/ITES and financial corporates at the Kakkanad Thripunithara belt and
Kalamssery, transit travellers passing by NH-47 and its bye-pass are the expected target segment, leading to
development of all upcoming hospitality projects in the vicinity of these pockets.
A strong focus on infrastructure development, proactive measures to promote IT sector, commerce and
tourism and effectively marketing Kerala as an attractive business and leisure destination shall directly
impact the future of hospitality industry in the state. Development in the sector shall be governed by
successful enactment of long impending state tourism policy and development control regulations.
According to a recent report by the World Travel and Tourism Council, demand of travel and tourism in
Kerala is expected to witness an 11.6% growth p.a between 2004-14, higher than any country or state in
the world. The boom in commerce, industry, trade and tourism will directly impact the rise in demand for
hospitality sector. It shall further narrow the gap in season and slack season with augmented ARRs and
occupancy levels all throughout the year till 2008. The additional supply of rooms by 2009 is expected to
create a competitive market environment and shall stabilise the ARR values, which are currently on an
upswing.
Kerala, known worldwide for its back waters, hill stations, eco-tourism and beaches, also holds the potential
for health tourism. There is a need for looking at parallel avenues of revenue from other hospitality
segments viz. service apartments, MICE with focus on NRI weddings and conferences, besides marketing
the already flourishing business line of ayurvedic spas. These emerging segments can be expected to get
increased clientele by way of business travellers frequenting the city on account of growth in the IT/ITES
sector in the city.
Outlook
Heri
tag
e
Source: Knight Frank Research
Figure 32
8,000
6,000
4,000
2,000
--
Five
-sta
rD
elu
xe
Five
-sta
r
Four-
star
Category-wise ARR
Rs.
Minimum Maximum
ConclusionThe Indian hotel sector is witnessing high demand on the back of growth in business opportunities and
increased domestic tourism. This has led to a wave of unprecedented room rate realisations and occupancy
levels. Going forward, on account of supply lag, we forsee the ARRs to increase by 18-20% over the next
two years. Once all the under-construction and planned supply is brought in the market, there would be a
stabilisation, both in ARRs as well as occupancy levels. Some markets like Hyderabad and Pune, where the
supply is expected to outpace demand, there can be a slight drop in ARRs before stabilisation is achieved.
As we move ahead, the Indian hotel industry will see the emergence of two key trends - the spread to the
smaller towns and cities and increased capacity creation in the mid-end and budget segment. The Indian
hotel sector network which was till now limited to the metros and few large cities of the country, will now
be seen encompassing the smaller cities (Tier-II and III) which are currently under widespread real estate
activity. Positive economic outlook for these centers has led developers to build land banks, many of which
will house hotel projects to service the demand created.
Rising land costs in the metros and the tier-I cities have been pushing up the projects costs of hotel
developments. This has been reflected in higher ARRs and the construction of luxury and premium segment
hotels. Heightened business travel emanating from all sectors has led to increase in demand for budget
hotels that provide quality and efficiency in service. This demand is more pronounced in the existing
business and commercial centers. However, the rising land values in these cities have led to questioning the
sustainability and feasibility of budget hotels here. The cities like Mumbai and NCR have the least number
of such hotels because of exorbitant land costs.
Realising the potential for branded mid-market product, numerous foreign and Indian chains are planning
economy segment hotels in India. Some of these are Formule 1 (JV between Accor and Emaar MGF), Keys
(Burrgruen Hotels), Red Fox Hotels(Lemon Tree), HomeTel (Sarovar Hotels), etc. Already one brand, the
Ginger Hotels by the Taj group is operational in Hardwar and Pune and new projects are planned in Mysore,
Trivandrum, Durgapur, Panjim, Agartala, Tirupur Pondicherry, Baddi and Nashik. So, in times to come, the
development opportunity for mid-market segment has plenty of room to grow.
As the hospitality sector moves ahead, it is witnessing the advent of niche segments like spas and service
apartments which were earlier considered as low growth segments. Although primarily located in Tier-I
cities like New Delhi, Mumbai and Bangalore, the rising demand is seeing them spread to Tier-II and Tier-III
cities. Popular service apartments in Mumbai include Taj Wellington Mews, Lakeside Chalet Marriott
Executive Apartments, Grand Hyatt Residence, etc. Star city has six such properties in Chennai and Seasons
provides quality accommodations in Pune. Accor and Marriott are looking at setting up such properties in
Bangalore, Chennai and Kochi.
Resorts have become more specialised over the years and offer everything from spas to alternate
rejuvenations treatments. Major hotel chains are introducing spas in their luxury and business hotels to tap
this demand, for example, Taj has created its own brand Jiva while some other hotels have tied up with
international spa brands like Banyan Tree. Stand alone spa resorts are also gaining prominence, like Ananda
in the Himalayas in Uttaranchal and Angsana spa and resort in Bangalore. With the growth in medical
tourism, this segment will get the requisite clientele to sustain.
The hotel sector in India does project great opportunities but a lot needs to be done in order to realise its
full potential. Declaring this sector as high priority industry for foreign direct investment has been a step in
the right direction. Though this has cleared the way for capital infusion in this sector, investors still find
bureaucratic rules, infrastructure limitations, complex business practices, corruption as roadblocks to doing
business in India. Given the price sensitivity, high land cost and long gestation period, what is required the
most are requisite policy changes by the government. Till that is done, investors and developers will be
hesitant to venture in this segment in a big way.
www.knightfrank.com
Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007
www.knightfrank.com
The India Hotel Review is
prepared by Knight Frank
India Research.
General enquires should be addressed to:
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Fax: +91 22 2267 0899
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Sunil Vattekat
Vivek Jala
Gulam M. ZiaNational Director - Advisory Services
gulam.zia@in.knightfrank.com
malvika.chandra@in.knightfrank.com
sangeeta.sharma@in.knightfrank.com
monica.babar@in.knightfrank.com
amrita.sinha@in.knightfrank.com
chetanbir.kaur@in.knightfrank.com
maureeta.lopez@in.knightfrank.com
anmol.haval@in.knightfrank.com
binita.patel@in.knightfrank.com
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sunil.vattekat@in.knightfrank.com
vivek.jala@in.knightfrank.com
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© Knight Frank 2007
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