c&w hospitality report - the voyage

8/14/2019 C&W Hospitality Report - The Voyage

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INDIA REPORT

A RESEARCH PUBLICATION | JANUARY 2009

THEVOYAGEAn exploration of key hospitality markets in India


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EXECUTIVE SUMMARY

India's cultural diversity, weather, history, natural

offerings as well as people together contribute

towards propagating the country's positive

brand image across the world. While the recent

uncertainty in the economy has affected the

hospitality industry at large, India still remains

one of the world's fastest growing hotel

markets. With an overall increase in leisure and

business travellers over the past few years,

India's hospitality industry has attracted global

attention. A buoyant domestic economy, the

government's open sky policy, an overall real

estate boom, initiatives to liberalise foreign

investment and especially the Tourism Ministry's

efforts together contributed to healthy demand

for hospitality space in major cities across India.

The overall contribution of travel and tourism

to the national economy is estimated at

approximately 5.3% annually. It is expected that

by the year 2020, tourism related activities in

India will contribute approximately INR 8,500

billion to the GDP. As the industry constitutes

various other related sectors, such as hotels,

hospitals, aviation and shipping among others, it

acts as a multiplier towards overall revenue

generation.

This special report endeavours to understand

the existing and projected hospitality sector's

performance in three categories namely Up-

scale, Mid-scale and Budget hotels across 11

Indian cities, along with assessment of the

external drivers and potential industry factors

impacting the industry. The demand drivers for

the industry are assessed by examining closely

related factors like existing hotel room stock,

availability of new hotel properties, human

resource availability, policy administration,

investment for infrastructure development and

socio economic climate.

As domestic and international travellers get

more apprehensive about security in key Indian

cities, occupancy rates and room tariffs are likely

to drop in the short term. This can be

substantiated by the recent official estimates

released by MoT stating the drop in overseas

visitors to the country in November 2008 by 2.1

percent as compared to November 2007. Over

the next few years, occupancy rates are

expected to witness a fall in light of the current

economic scenario as well as the anticipated

over supply situation in a select markets.

The report analyses the performance of 20

states and union territories to provide a

cumulative ranking of the top 5 states

considering four broad parameters namely

Economic Drivers, Demography, Infrastructure

and Tourism.

We hope to have been of substantial assistanceto our readers through this special report.

CONTENTS

1

A RESEARCH PUBLICATION

IND IAREPORT

THEVOYAGE - An exploration of key hospitality markets in India

INDIA REPORT | JANUARY 2009

1 Executive Summary

2 The Journey So Far

4 Travel & Tourism Industry in India

4 Fuelling Factors

6 City Overviews

22 Research Findings

29 Concerns & Challenges

30 State Rankings

33 Results of Ranking Exercise

34 Conclusion


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THE JOURNEY SO FAR

Over the last decade, the intensified rush to

India for tapping business opportunities had a

ripple affect on several sectors that made hay in

the sunshine. It was good news for India's

hospitality and tourism industry which boasts of

diversity in culture, weather, history, nature's

offerings as well as people. From a growth driver

perspective, while the current uncertainty in the

global financial market, along with the credit

crisis, in its aftermath, has adversely affected

businesses', India's inherent potential and appealas a tourist, medical and heritage site remains

unaffected.The sector is actively leveraging itsrich historical background and diversified culture

to graduate from being a relatively smaller player

to a higher position in the global hospitality

arena.

Business in the hotel industry, much like any

other sector, is cyclical in nature. Any significant

change in the economy, such as the present

liquidity crisis, affects the sector resulting in

lower occupancy levels, delays in upcoming

projects and anticipated decrease in room rates.Although India boasts of a fundamentally sound

economic system, positive infrastructure

initiatives and increased investor interest, whichhas been too evident in the last two years,

across all asset classes including the hospitality

industry, the current financial crisis has brought

with it, a slow down in the industry's growth

prospects over the short to medium term. The

present economic conditions have led to

adversaries such as project delays and in some

cases even cancellation of projects, thereby

impacting the upcoming hospitality supply to a

large extent.

Over the years, this sector has been faced withmultiple challenges, primary being the individual

city level supply-demand disequilibrium in hotel

rooms. Yet another micro factor affecting the

industry's growth rate is an overwhelming

preference for budget category hotels amongst

price sensitive corporate/customers. However,

major developers have taken a different stand

announcing plans to develop 5 star deluxe, 5 star

and 4 star category hotels primarily across Tier 1

and 2 cities rather than budget hotels.

Anticipation of tying up with international

operators and better brand image, betteropportunity to attract funding from investors

and higher prospective of an early break-even

have initiated many developers to enter the

hospitality asset class.

The overall tourism activity in India during 2007

had remained healthy. Much as Low Cost

Carriers (LCC) had revolutionised air travel in

the country with no-frills services and low

airfares, budget hotels too surfaced a few years

ago with the promise to offer better, affordable,

standardised and branded hotel rooms at pricesmatching the unorganised sector. Brands such as

Lemon Tree, Indian Hotels, Ginger Hotels, ITC's

Fortune brand, Clarks Inn, Choice Hotels and

Sarovar Hotels to name a few, introduced hotel

rooms for the economy traveller. However, akin

to the budget airlines, no-frills branded hotels

were also forced to appreciate their room rates

on the face of escalating real estate and

operational costs, so much so that the tag

'Budget Hotel' has become a misnomer with

room tariffs crossing over INR 4,500 (USD 90)

per night. In the present low-key marketsentiment and the corporate sector going into a

'smart spending' mode with serious cost control

2


IND IAREPORT



lIndia is the world's fifth most popular tourist

destination according to the World Travel and1

Tourism Council. Occupancy rates for hotels

in India are among the highest in the world.From about 8 to 9 branded hotels in 2000, India

will be home to approximately 40 hotel brands2

by 2011 .

lAverage Room Rate (ARR) for Delhi and

Mumbai are comparable to that of global cities

such as New York, Singapore and Hong Kong.

ARR in India had doubled in the period between

2003-07. Approximately USD 150 billion is

expected to be spent over the next five years

on tourism related infrastructure by the3

Government .

l

Between 24,000 to 25,000 new up-scale hotelrooms are expected in major Indian cities by the

year 2011 as compared to a total of nearly

18, 000 rooms in mid-scale and budget segment.

lTotal stock of hotel rooms will continue to lag

behind demand by 2011.

Quick Facts

Another micro

factor affecting the

industry's growth

rate is an

overwhelming

preference for

budget category

hotels amongst price

sensitive corporate/

customers.


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IND IAREPORT



measures, the travel and hospitality industry has

been adversely hit. India Inc. is now making do

with tighter travel budgets, cheaper hotel stays

and shorter business tours with many

companies accommodating employees in

alternate accommodations like guesthouses and

serviced apartments instead of star category

hotels.

Another recent important development has

been the growing global concerns over security

issues in India following the recent terror

attacks in Mumbai. This has resulted inrescheduling and even cancellations of travel

plans to India by many foreign tourists especially

in the Tier I and II cities. This has affected not

only the leisure tourist segment of travellers but

also the health and medical as well as MICE

(Meetings, Incentives, Conventions and

Exhibitions) tourists to India.

Despite the temporary slowdown as enunciated,

India is still one of the world's fastest growing

hotel markets. With an overall increase in leisureand business travellers over the past few years,

India's hospitality industry has attracted global

attention. Hotels across all segments achieved

healthy occupancy levels until end-2007.

A buoyant domestic economy, the government's

open sky policy, an overall real estate boom,

initiatives to liberalise foreign investment and

especially the Ministry of Tourism's (MoT)

Personal Travel & Tourism 1,653 6,763

Business Travel 339 1,153

Government Expenditure 59 162

Capital Investment 1,121 3,853

Visitor Exports 552 1,743

Travel & Tourism (T&T) Demand 3,890 14,680

Direct Industry GDP 1,094 3,222

Direct Industry Employment 13,127 16,437

('000 jobs)

2008 2018 E

Key Statistics - India

efforts to communicate the 'Incredible India'

campaign together contributed to a robust

demand for hospitality space in major cities

across India. The 'Incredible India' campaign was

launched in 2002 as an integrated marketing and

communication effort to promote India as a

destination across the world and is considered

to be one of the more successful initiatives so

far. With the success of this campaign, foreign

tourist arrival increased by almost 65%, from

2.38 million in 2002 to 3.92 million in 2005, while

foreign exchange earnings have grown by over95% during the same period. In 2007 inbound

tourist arrival touched 5 million, registering an

annual growth of approximately 12%. Foreign

exchange earnings from tourism for the same

period also witnessed an impressive annual

growth of 33% from USD 9 million in 2006 to

USD 11.96 million in 2007. In keeping with the

current growth rate, India's hospitality industry is

anticipated to grow at 8 per cent per annum4

between 2007 and 2016 .

Over the years 'hospitality', as a service in India,

has witnessed a paradigm shift with many

international hotel chains and operators entering

the domestic market, enabling new business

prospects for established corporate firms and

entrepreneurs alike. Though they operate in

different domains the hospitality sector by and

large shares a direct relationship with the travel

and tourism industry.

2003 2004 2005 2006 2007 2008 2010 P

GDP Growth Vs. T&T Contribution

2%

4%

6%

8%

10%

0%

Source: World Trade Tourism Counci l

Source: Indiastat

GDP Growth Contribution of T&T to GDP


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IND IAREPORT


INDIA REPORT | JANUARY 2009 4

TRAVEL & TOURISM INDUSTRY IN INDIA

Tourism is an integral part of the global

economy and India is no exception to this rule.

This industry, by virtue of being labour

intensive, is a significant employment generator

and a substantial contributor towards foreign

exchange for any nation. The Indian tourism

industry directly contributes around 2%

towards the national GDP. According to the

Hotel Association of India, the overall

contribution of travel and tourism to the

national economy is estimated at approximately5

5.3% annually.

It is expected that by 2020, tourism related

activities in India will contribute approximately6

INR 8,500 billion to the GDP . As the industry

constitutes various other related sectors, such

as hotels, hospitals, aviation and shipping among

others, it acts as a multiplier towards the

overall revenue generation.

In the provisional data released by the Ministry

of Tourism (MoT), Travel & Tourism industry

recorded an annual growth of 33% during 2007

in terms of foreign exchange earnings in a single

year. The number of inbound travellers also saw

an increase in this period. Although foreign

tourist arrivals (including business and leisure

travellers) are the prime source of revenue

growth, complimentary sectors such as medical

tourism and MICE travel also contributed

significantly towards India's GDP. Tourist arrival

is expected to increase gradually in the coming

years on account of improved overall

infrastructure, positive government initiatives ontourism and to a larger extent India's

emergence as an outsourcing hub.

According to World Travel and Trade Council

(WTTC) estimates, India's tourism demand is

likely to grow at an average rate of 8.8% till

2013, making it the third fastest growing7

tourism market in the world. In addition, the

government's move to declare hotel and

tourism industry as a high priority sector with a

provision for 100% foreign direct investment

(FDI) through the automatic route has madethis industry further lucrative for parking funds.

It is estimated that the hospitality sector could8

see an infusion of USD 11.41 billion with

around 40 international hotel brands making an

entry into the country by 2011.

Economic Factors:

l

Favourable economic and political climatelSustained GDP growth between 7.5 - 8%

lSteady FDI equity inflow which crossed the

USD 10 billion mark in 2006-07

lGrowth in manufacturing and services sector

Influencing Sector Dynamics:

lSurge in foreign tourists at a Compound

Annual Growth Rate (CAGR) of 14% over

the past five years

lRising demand for good quality

accommodation due to increased growth of

tourist arrival (domestic and foreign) for

leisure and business.

Infrastructure Play:

lAdditional inter city air connectivity

lUp-gradation of National Highways and State

Highways

lEasy accessibility to various places of tourist

importance through massive railway network

INDIA'S BOOMING HOSPITALITY SECTOR:

FUELLING FACTORS

Foreign Tourist Arrival to India (Million)

FX Earnings from tourism (USD Billion)

1995

ForeignTouristArrival

FX

Earnings

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006*

2007**

Q12008

Foreign Tourist Arrival Vs. Forex Earnings

1

2

3

4

5

6

0

2

0

4

6

8

10

12

14Phenomenal earnings growth of 57% during 2006;Positive image of the country and successful brandingof 'incredible India 'Campaign' are the factors.

Source: Indiastat


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IND IAREPORT



Government Initiatives:

lInitiatives undertaken by the MoT to

overcome accommodation shortage:

wCapital subsidy sanctioned for 43 budget

category hotels and interest subsidy for

86 hotels.

wRecognition of various home owners by

classifying their facilities as 'Incredible

India Bed and Breakfast establishments'

under 'Gold' & 'Silver' category.

wAcquisition of land from land owning

agencies for building hotels in PublicPrivate Partnership (PPP) model on Build,

Own, Transfer (BOT) basis.

lMoT promoted several tourism driving

concepts which also led to overall growth in9

this sector :

wRural Tourism: Aimed at promoting rural

India in an effort to sustain rural

traditions and pristine environments, the

move has proved to be a great getaway

option for urban tourists.

wCruise Tourism:Aimed at providingworld-class infrastructure and related

facilities at various ports and attract

foreign tourists for cruise shipping in

India.

wEco-Tourism:Aimed at preserving,

retaining and enriching natural and

cultural resources for environmental

protection and community development.

wAdventure Tourism:Financial assistance is

being provided to State/ Union

Territories to set up facilities fortrekking, rock climbing, mountaineering,

aero-sports, winter/ water sports, wildlife

viewing etc.

wMedical Tourism:Medical and health

facilities available across all cities in India

are being promoted on account of world

class doctors and hospitals as less

expensive treatment.

lFew of the other key government initiatives:

wMoT has been proactive in sanctioning

funds for various tourism projects and

several initiatives have been taken up to

boost the 'Incredible India' campaign to

give impetus to tourism sector.

wFew State governments have

initiated/implemented/amended tourism

policies to support the initiatives of the

Central Government:

- Harayana Tourism Policy, 2008 implemented

- Tamil Nadu Tourism Policy Note 2008-

09 was implemented

wUnion Budget 2008-09 policy decisions:

- Five-year income tax holiday to two,

three and four star category hotels to

be established in 27 specified districts,

which have been declared as "World

Heritage Sites" by United Nations

Educational, Scientific and Cultural

Organization (UNESCO). However,these hotels would have to become

stoperational between 1 April 2008 and

st31 March 2013. This measure has been

taken in response to the significant rise

in tourist arrivals at these heritage

sites.


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ProminentCities

Upcoming(Numberof Rooms)

Upscale 7718 4600Delhi (NCR) Midscale 2967 4106

Budget 1795 3474

Upscale 7017 2686Mumbai Midscale 2624 3336

Budget 2230 600Upscale 3198 5866

Bangalore Midscale 2016 3132Budget 3604 641

Upscale 2427 2104Chennai Midscale 2142 1310

Budget 2910 310

Upscale 1537 3554Hyderabad Midscale 943 1937

Budget 2608 250

Upscale 1498 2002Kolkata Midscale 432 453

Budget 422 0

Upscale 460 1984Pune Midscale 1135 1683

Budget 739 229

Upscale 593 867Ahmedabad Midscale 242 366

Budget 849 150

Upscale 3192 2480Goa Midscale 1029 435

Budget 3138 0

Upscale 567 520Cochin Midscale 468 683

Budget 1033 120

Upscale 1965 609Jaipur Midscale 804 1016

Budget 1312 0

HotelClassification

Existing(Numberof Rooms)

Study Structure

6


IND IAREPORT



CITY OVERVIEWS

The objective of this study has been to

understand the existing and projected

hospitality supply in three categories as

mentioned below for the prominent 11 Indian

cities under consideration; as well as assessing

the external drivers and potential industry

factors impacting the hospitality industry in

these cities. Apart from this, the state ranking

has been done for 20 states based on economic

drivers, tourism, demography data and existing

infrastructure parameters. The time period ofthe study extends from the current period to

2011.

The sub-segments of 2 star and 1 star categoryhotels, home stays and service apartments have

not been considered for our study. Several

classifications for hotel categories exist, but for

our study we have undertaken the following

assumption for our three hotel categorisations:

Up-scale Hotels : Comprises 5 star delux

and 5 star category

hotels

Mid-scale Hotels : Comprises 4 star

category hotelsBudget Hotels : Comprises 3 star

category hotels

We aim at giving a true representation of 5 star

deluxe, 5 star, 4 star and 3 star category hotels

across these eleven cities to the best of our

knowledge and with reliable data made available

in the public domain. Cushman & Wakefield

Research has mapped the existing up-scale, mid-

scale and budget hotels in the course of this

paper and we have also tried to map the

potential areas for future development withinthe cities under consideration.

Note: The choice of these cities is based on the highest tourist inflows,

according to MoT data and the data for existing and upcoming hotels hasbeen considered in the organised sector.

Source: Cushman & Wakefield Research


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IND IAREPORT



AHMEDABAD

Ahmedabad is an important trade, commerce

and industry base in western India as well as

Gujarat, attracting an increasing number of

business/corporate travellers, largely on account

of increased investments within the state which

has prompted the state government to be

proactive and upgrade the city's overall

infrastructure. Proximity to the port at Surat has

also enabled increased business activity within

the city. There are few key tourist attractions

within the city like Sabarmati Ashram and GirNational Park to name a few; besides this,

Ahmedabad is a transit destination to MountAbu in Rajasthan which is a leisure/ holiday hill

station. The city also boasts of few very reputed

educational institutions (including IIM,

Ahmedabad) that also contribute to check-ins.

Hospitality Dynamics

lOut of the existing hospitality stock of

approximately 1,600-1,800 rooms,

approximately 50% fall under the budget

category, followed by up-scale hotels

accounting for 35% of all rooms underconsideration.

lC&W research study shows Ellis Bridge,

Navrangpura, Khanpur and Nehru Bridge as

prominent micro-markets that have emerged

as potential prime hospitality sub-markets for

up-scale and budget hotels.

lOccupancy Rate in the city's hotels increased

marginally from 72% in 2006-07 to 76% in

2007-08 with increased quality supply last

year. Similarly the ARR in the city has also

gone up substantially by approximately 31%;to arrive at INR 5,130 in 2007-08 as against

INR 3,910 in the previous year.

Upcoming Room Supply - Ahmedabad

Upscale Midscale Budget

59%

10%

31%

Source: Cushman & Wakefield ResearchSource: Cushman & Wakefield Research

Ahmedabad City Map

Narol

Vatwa

Isanpur

Ghodasar

CTM

AmraiwadiKankarai

Mani Nagar

Paldi

Fatehpur

Vasana

Vishala

Juhapura

Vejalpur

Saraspura

Haripura

Hirawadi

NaranpuraMemnagar

GurukulUniversityAreaVastrapur

Satellite

Shahibagh

Ranip

Chandlodia

Ghatlodia

Sola

Acher

Hansol

Chandkheda

Gota

AHMEDABAD

Upscale Midscale Budget Upcoming Supply Zone

7

Average Room Rate Vs. Occupancy - Ahmedabad

1,000

30%2,000

3,000

4,000

5,000

6,000

0 0

ARR(inINR)

OccupancyRate(%)

2004-05 2005-06 2006-07 2007-082003-04

60%

90%

ARR Low ARR High Occpancy

Source: CRISIL


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8


IND IAREPORT



lMarket segmentation indicates that nearly60% of the city hotel occupants are

business/corporate travellers, while nearly

14% of the guests represent leisure segment.

Outlook

Fresh supply addition during 2008-2011 is likely

to witness a more pro up-scale shift with

approximately 1,300-1,500 rooms acrosscategories. Of this estimate, approximately 63%

is likely to be in the up-scale category followed

by 26% in the mid-scale category. With more

commercial and retail supply expected in a

couple of years, the hospitality industry in the

city is likely to be much more active in the years

to come.

BANGALORE (Bengaluru)

Bangalore (officially Bengaluru) is home to

numerous public sectors undertakings,

aerospace, defence establishments, biotech as

well as manufacturing setups. Besides this,

Bangalore is also one of the leading contributors

to India's IT/ ITeS industry; which resulted in

increased inflow of business travellers within the

city. In the past couple of years the hospitality

sector in the city has indirectly received the

necessary impetus from state government; in theform of increased investment across various

sectors coupled with suitable business friendly

policies. The newly-built Bengaluru International

Airport (BIA) (started operations in May 2008)

helped add domestic and international sector

connectivity. Bangalore though not a major

leisure destination by itself has been a transit

location for cities like Mysore, Coorg, Tirupati,

Hampi, etc. The city is also considered as an

educational hub housing few renowned

institutions offering various professional courses

in engineering, medicine, management, law etcwhich acts as a driving factor contributing to

demand for room nights. Bangalore is also a

MICE destination and has gained significant

importance in the recent past due to the newly

formed Bangalore International Exhibition

Centre (BIEC).


lThere is a fair distribution of existing hotels

in all categories, with budget hotels

accounting for a maximum of 43%, followed

by up-scale hotels at 33%.

lARR in the city increased by a minimal 1% to

reach INR 12,310 in 2007-08 as against INR

12,200 in the previous year, while occupancy

rate stagnated at 74% for the past two years.

lNearly 76% of guests staying in up-scale and

mid-scale hotels belong to the corporate

profile category and similarly in budget hotels,

close to 60% of the guests visit for business

purpose.

Average Room Rate Vs. Occupancy - Bangalore

30%4,000

8,000

12,000

16,000

0 0

ARR(inINR)

OccupancyRate(%)

2004-05 2005-06 2006-07 2007-082003-04

60%

90%


Upcoming Room Supply - Bangalore


63%

6%

31%


Source: CRISIL

While ARR in

Bangalore

witnessed an annual

increase of 1% in

2007-08, occupancy

rates have remained

stagnant for the

past two years.


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9


IND IAREPORT



Outlook

Whitefield, Off CBD locations and the North

Bangalore stretch are likely to witness the

majority of the upcoming supply. The upcoming

supply from 2008-2011 has seen a shift, with

nearly 63% supply expected in the up-scale

market, unlike the previous years when there

was an equal distribution amongst all category ofhotels. Upcoming supply comprises of

approximately 10,000 10,500 hotel rooms

spread across 44 hotels. ARR and occupancy rate

are likely to witness further correction in 2009

due to the influx of new supply besides the

existing slowdown in economy and global

turmoil.

Kumbharhalli

Ganigarahalli

Madanayakahalli Ramachandrapura

Vidyaranya

Pura

YelahankaNew Town Kannur

NH 7

DasarahalliAduru

ByappanahalliBidrahalli

NH 4 Jalhalli

AMCOColony

SanjayNagar Hebbal HBR Layout

Kalkere

BenniganaHalli

KavalByrasandra

ClevelandTown

CV RamanNagar

Mahadevapura

Doddanekundi

BrookeFieldAirport

Marathahalli

Baligeri

HSR Layout

Singasandra

Hulimavu Begur

JP Nagar

Koramangala

RajarajeshwariNagar

Kengeri

KengeriSatelli te Town

AnjanaNagar

Nagarbhavi

AnnapurneshwariNagar

Peenya NandiniLayout

BasaveshwaraNagar

Kamakshipalya Rajaji Nagar

VijayaNagar

GavipuramExtension

Banashankari

Gavipuram

Sarjapur Rd

NH 209

SH 17

KaglipurHakkipikki

Colony

ElectronicCity

BommasandraIndustrial Area

BANGALORE


Bangalore City Map

CHENNAI

Chennai, a metropolitan city, is an important

commercial and industrial hub of India. The city

is host to various industries such as

manufacturing, automobile ancillaries, IT/ ITeS,

shipping, etc. and this strong commercial and

industrial presence in the city has resulted in

large inflow of business travellers.

Besides Chennai being a tourist attraction in

itself, proximity to traditional destinations like

Pondicherry, Mahabalipuram, etc has made it a

favourable leisure destination too. Chennai's

physical infrastructure is good with two ports as

well as an excellent road and rail network.

Average Room Rate Vs. Occupancy - Chennai

6,000

8,000

10,000

ARR(inINR)

OccupancyRate(%)

60%

90%

30%

2,000

4,000

0 0


2004-05 2005-06 2006-07 2007-082003-04


Source: CRISIL


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10


IND IAREPORT



Upcoming Room Supply - Chennai


57%

8%

35%


lAccording to C&W Research estimates,

room stock Chennai constitutes of 7,400

7,600 hotel rooms, of which, budget hotels

account for approximately 39%, followed by

up-scale hotels at 33%.

Korattur

Korattur Eri VillivakkamPerambur

Vyasarpadi oyapuram

OldWashermanpet

GeorgeTown

SowcarpetPeriyamet

Choolai

Ayanavaram

Kilpauk

Thirumangalam

AnnaNagar

AmbatturIndustrial

Estate

Maduraivoyal Koyambedu

Vanagaram

Valasaravakkam

Vadapalani

Choolaimedu

Mowlivakkam

Porur

Nandambakkam

St ThomasMt

Alandur

Madipakkam

Tirusulam

riperumbudurPallavaram

Guindy

IIT Madras Tharamani

Adyar

Adyar River

BesantNagar

SanthomeBeach

Mylapore

Nandanam

Teynampet

BeachRoyapettah

Marina

TheyagarayaNagar

Triplicane

ChintadripetChetpet

CHENNAI

Puzhuthivakkam

Velachery

Perungudi

Pallikaranai Okkiyam

Palavakkam

Kotivakkam

ValmikiNagar

Thiruvanmiyur

Sardar Patel Rd

JawaharlalNehru Rd

Arcot Rd

NSK Salai

Poonamallee High Rd

GH Rd

Man Rd

New Avadi RdMTH Rd

Dairy Rd

Airport


l

Amongst the three major south cities,Chennai witnessed an increase in ARR by

23% from INR 6,260 in 2006-07 to INR 7,690

in 2007-08 owing to the improved

connectivity with Association of South East

Asian Nations (ASEAN) countries and Middle

East. On the other hand influx of quality

supply during the same timeframe led to a

corresponding decline from 77% to 75% in

occupancy rate.

lMarket segmentation of hotel occupants

indicate that corporate/ business travellers tothe extent of 59% stay in the up-scale & mid-

scale and 61% in budget category.

Contribution by leisure tourists is more in

favour of budget hotels accounting for 19% in

comparison to upscale & mid-scale options

contributing 9%.

Outlook

Chennai is likely to witness an addition of 3,600 -

3,800 room inventory over the next 3-4 years

trying to match up the future demand. The IT/

ITeS sector remains the primary demand driverfor up-scale hotel rooms, closely followed by the

manufacturing sector. This expected room supply

is likely to be spread across 15 hotels with

upscale category comprising 57% of the total

upcoming supply followed by 35% in the mid

scale category.

Chennai City Map




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11


IND IAREPORT



GOA

Goa is one of India's most visited tourist

locations due to its numerous beaches, colonial

architecture and unique Indo-Portuguese

heritage. The state attracts an average of 1.2

million tourist population which is almost equal

to the state's population. Almost 12% of the

total foreign tourists arriving in India visit Goa

while nearly 75% of the total direct charter

traffic is destined for the state. Tourism in fact

remains the main contributor to the state

economy with numerous leisure events likepopular flea markets and the Goan carnival

celebrated here. Further, there are several

corporate events, meetings and conferences held

in the city that essentially look at the up-scale

segment.

The Department of Tourism, Government of

Goa, is instrumental in planning and providing

the basic tourist infrastructure and other

facilities/amenities for tourists in the state. Goa

has been promoted as a round-the-year tourist

destination in India and overseas through variousevents, publicity literature, media and other

publications. Under the Goa Registration of

Tourist Trade Act, 1982, the body also exercises

control over hotels and travel trade activities in

the state.


VirdiBardez

Quitula

ChaporaRiver

Mapuca Bicholim(Dicoli)

Saligao

Sanquelim

Curti Tisk

Goa Velha

Cortalim

Kesarvale

Verna

Sancoale

Madgaon

Panaji

Marmagao

NH 17

NH 17Chaudi

Ponda

NH 17

ChoraoSanctuary

Goa City Map

Upcoming Room Supply - Goa

Upscale Midscale

85%

15%


lThe existing stock of hotel rooms in Goa is

pegged at approximately 7,200 7,500 of

which up-scale and budget hotel rooms

account for nearly 43% each, followed by

mid-scale at 14%.

lDuring 2006-07, leisure traffic both domestic

and foreign accounted for nearly 39% of the

total room occupants in up-scale hotel

category and 44% for mid-scale and budget

category.

lIncrease in domestic and foreign tourist

inflow has resulted in increase in ARR in

2007-08 by approximately 19% since the

previous year and similarly the Occupancy

Rate has increased by 2 points to 74% in

2007-08.Source: Cushman & Wakefield Research


Tourism remains

the main

contributor to the

state economy in

Goa.


14/40

Average Room Rate Vs. Occupancy - Hyderabad

0 0

ARR

(inINR)

OccupancyRate(%)

3,000

4,500

80%

60%

40%

100%


2004-05 2005-06 2006-07 2007-082003-04

20%

7,500

6,000

9,000

10,500

1,500

12


IND IAREPORT



Outlook

Approximately 2,800 3,000 hotel rooms under

up-scale and mid-scale categories are to be

made available over the next 3 - 4 years. This

upcoming room inventory is likely to be

available across 20 - 25 properties (including

capacity addition to existing properties).

There is likely to be some impact on the leisure

tourists inflow into the city in the coming

months on account of the global recession and

shifting of the international airport from south(which is predominantly been attracting

international tourists) to north Goa. With the

master plan being released proposing likely

changes in the land use, the future supply is likely

to be impacted.

Average Room Rate Vs. Occupancy - Goa

25%1,500

6,000

7,500

9,000

0 0

ARR(inINR)

OccupancyRate(%)

3,000

4,500

75%

50%

100%


2004-05 2005-06 2006-07 2007-082003-04

HYDERABAD

Historically, the economy of Hyderabad has

been dependent on the manufacturing and

services industries. Sustained growth in IT/ ITeS,

Biotech and Pharmaceuticals sector is a key

demand driver for the hospitality sector in thecity with respect to business/corporate

travellers. In the recent past Hyderabad has

emerged as a medical tourism hub with opening

up of few reputed hospitals. Besides this, the

International Convention centre has enabled the

city to become a preferred MICE destination.

The State government continues to facilitate

development of social and public infrastructure

such as the recently completed new

international airport at Shamshabad.


lThe existing hotel room stock of

approximately 5,000 5,200 rooms is

dominated by budget category accounting

for approximately 51% of this total stock;

spread across prime business districts of

Secunderabad, Sarojini Devi Road, Ameerpet,

Lakdikapul, Raj Bhavan Road and Nampally.

lUp-scale hotels have a presence in the prime

localities of Banjara Hills, Begumpet,

Madhapur and Gachibowli.

lDomestic business travellers account for

46% of the room occupancy, followed by

foreign business travellers at 13% in the

categories under consideration.

lThe Average Occupancy Rate in 2006-07 was

75%, however, the subsequent year has seen amarginal decline to 72%, on account of

infusion of additional room inventory.

lThe ARR, however, grew by approximately

14% between 2006-07 and 2007-08 due to

an increase in demand for rooms.

Upcoming Room Supply - Hyderabad


61%

4%

35%

Source: CRISIL

Source: CRISIL



15/40


16/40

14


IND IAREPORT




lThe existing hospitality supply in Jaipur

consists of 4,000 4,200 rooms spread

across 71 hotels.


VishwakarmaIndustrial Area

VidyadharNagar

Bani Park

SindhiCampMilitary

Cantonment

Khatipura

Pink City

Rambagh

Civil LinesVidyutNagar

ShyamNagar

Ram Nagar

Devi Nagar

BaisGodam

AdarshNagar

Tilak Nagar

JAIPUR

JawaharNagar

GandhiNagar

TonkPhatakArjun

Nagar

Gopalpura

Mansarovar

TransportNagar

Badanpura

ShankarNagar

Jal MahalTalav

Airport

Jaipur City Map

lApproximately 48% of the existing supplycomprises of up-scale hotels, primarily

located along Amber Fort Road, Amer Road,

Tonk Road, Bhawani Singh Road and M.I.

Road followed by 32% of budget hotels

located in areas such as Bani Park, S.C. Road,

Station Road, Civil Lines and Sindhi Camp.

lImpact of the US sub-prime crisis that began

in September last year and growing domestic

terrorism (blasts in Jaipur city) resulted in

occupancy rates dipping from 70% in 2006-07

to 64% in 2007-08. On the contrary, there isan increase of approximately 6% in ARR from

2006-07 to 2007-08.

lSimilar to Goa, Jaipur being a leisure

destination witnessed close to 33%

occupants in the up-scale & mid-scale

category in the leisure segment.

Upcoming Room Supply - Jaipur


63%

37%

Outlook

Jaipur is likely to witness supply of 1,600 1,800

rooms in the next three years, of which 63% fall

in the mid-scale category and the remaining 37%in up-scale category. This increase in the number

of rooms is attributed to increased domestic

business travel, interest from the MICE market

and a rise in international charted flights bringing

in foreign tourists.Source: Cushman & Wakefield Research



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15


IND IAREPORT



KOCHI

Kochi, the economic capital of Kerala by volume

of trade, in the recent past has emerged as one

of the fastest-growing tier-III cities in India. The

key economic drivers here are the fishing

industry, textile retailing, seafood and spice

export, tourism, ITES etc.

The State Government is proactive in promoting

itself as an attractive global tourist destination.

With the tourism department having fruitfully

promoted cities such as Kochi and Alapuzha, thetotal number of domestic and foreign tourists

visiting the state has increased considerably.

With good size of upper-middle income

population coupled with development of

physical infrastructure (airports, roads etc) has

created a better platform for the hospitality

sector in smaller Tier III cities like Kochi.


lBudget hotels in the city account for nearly

50% of the total existing supply of

approximately 2,000 2,200 rooms. In this

category, the profile of guests comprises 43%

corporate and 30% of leisure travellers.

lARR in Kochi has increased by 12% in 2007-

08 over the previous year largely on account

of the overall increase in tourism related

activities.

lOccupancy rate recorded a marginal declineto touch 64% in 2007 -08 as against 67% in

2006 07.

Outlook

Kochi is expected to witness an additional supply

of approximately 1,200 1,400 hotels rooms in

the next three years. This supply will be

concentrated towards up-scale (39%) and mid-

scale (52%) categories essentially owing to the

gradual increase in foreign and domestic tourists

to the city. In the years to come, the profiles ofguests are likely to remain concentrated towards

leisure tourism because of the aggressive

tourism promotion initiatives undertaken by the

state government.


Vaduthala

ElamakkaraPalarivattom

Edappally

Kaloor

KathrikadavuAyyappankavu

KadavantharaVembanadLake

Ravipuram Vytilla

Chelavannur

Thevera

KonthuruthyMaradu

Kappalandimukku

Thopumpady

COCHIN

Airport

NH 47

MG Road

Kochi City Map

Average Room Rate Vs. Occupancy - Kochi

25%

2,500

5,000

0 0

ARR(inINR)

O

ccupancyRate(%)

2004-05 2005-06 2006-07 2007-082003-04

50%

100%

75%


Upcoming Room Supply - Kochi


39%

9%

52%

Source: CRISIL

Source: Cushman & Wakefield ResearchSource: Cushman & Wakefield Research

The growing upper-

middle income

population coupled

with the

development of

physical

infrastructure

(airports, roads etc)

has created a better

platform for the

hospitality sector insmaller Tier III cities

like Kochi.


18/40

16


IND IAREPORT



KOLKATA

Kolkata, the capital of West Bengal, is the

commercial capital of the north-eastern region.

Most companies have their regional offices in

the city which acts as a major demand driver for

the hospitality sector. Kolkata is also a major

commercial and military port, being the only city

in the region to have an international airport

besides having good port infrastructure. It is also

the headquarters of Indian corporations like ITC

Ltd, Birla Corporation, RPG Ltd, Peerless

Industries, etc. Many global and domesticsoftware companies have set foot in the city and

the gradually growing IT/ ITeS sector is expected

to drive the development of the hospitality

sector in the city. Constructions of various

flyovers, up-gradation of the international

airport and extension of METRO have been a

few of the initiatives taken to improve

infrastructure and to keep pace with all the

development activities. Kolkata has also gained

significance as a MICE destination with large

number of conferences held at the city.


lThe existing room inventory consists of

2,300 2,500 rooms spread across 23 hotels.

lApproximately 64% of this room inventory

consists of up-scale hotels, primarily located

along Salt Lake City, Park Street, Jawaharlal

Nehru Road and AJC Bose Road.

lThe remaining existing room inventory is

divided into mid-scale and budget hotels each

constituting approximately 18%.


Kolkata City Map

KOLKATA

Liluah

Shalkiya

Beniatola

Paikpara

Ultadanga

South

Dum Dum

Krishnapur

Salt Lake

Kankurgachi

Beleghata

Narkeldanga

Kulia

Tangra

Bow

Bazaar

Gobra

Topsia

TiljalaBallygunge

Bhawanipur

Alipore

Kalighat

TollygungeBehala

Kazipara

Royal Calcutta

Golf Club

Paschim

DarishaPurba

Darisha

Bijoygarh

Naktala

Santoshpur

Garfa Haltu

Kasba

Baishnabghata

Patuli Township

Dhapa

Mominpur

Taratala

Nature ParkRajarhat

Gopalpur

Garden

Reach

Hooghly

River

Shalimar

Shibpur

MailPanchghara

Average Room Rate Vs. Occupancy - Kolkata

40%

20%2,000

4,000

6,000

8,000

0 0

ARR(inINR)

OccupancyRate(%)

2004-05 2005-06 2006-07 2007-082003-04

60%

80%



Source: CRISIL


19/40

Average Room Rate Vs. Occupancy - Mumbai

2,500

30%

15%

5,000

7,500

10,000

12,500

0 0

ARR(inINR)

OccupancyRate(%)

2004-05 2005-06 2006-07 2007-082003-04

75%

60%

45%

90%


Upcoming Room Supply - Kolkata

Upscale Midscale

82%

18%

17


IND IAREPORT



lARR increased by 25% from INR 5,500 in2006-07 to INR 6,860 in 2007-08 due to

increasing demand for room nights in areas

like Salt Lake, Rajarhat, Kariadanga, Dankuni

etc. Similarly the occupancy rate witnessed a

marginal increase from 75% in 2006-07 to

76% in 2007-08.

lSimilar to other metros, Kolkata is noexception to the business/ corporate

travellers being the major occupants (63%) in

the hotels under consideration.

Outlook

New supply of approximately 2,400 - 2,600

rooms is expected to come up in the city over

the next three years, spread across 11 new hotel

developments. Majority of these rooms will be in

up-scale category constituting approximately

82% of the total expected room supply, with theremaining 18% in the mid-scale category.

Additional supply is expected to be

concentrated along the EM Bypass, Salt Lake

Sector V and New Town.

MUMBAI

Mumbai, the commercial and entertainment

capital of India, houses important financialinstitutions such as the Reserve Bank of India,

Bombay Stock Exchange and National Stock

Exchange of India etc. There are plenty of

Banking Financial Service and Insurance (BFSI)

companies operating from this city besides the

IT/ ITeS firms; these two sectors are key

demand drivers for the hospitality sector. The

city has improved connectivity to various leisure

and commercial hubs like Pune, Goa, Thane,

Nashik, Powai, Daman & Diu etc. Mumbai is also

a transit city for foreign tourists travelling to

other cities within the country and also housesseveral corporate headquarters.

Excellent rail network, improved airport

infrastructure, additional international anddomestic air routes, sea and harbour links in the

city are few critical factors providing impetus to

the hospitality sector. Another noticeable trend

in the city is the large number of upscale

projects located in close proximity to the

airport. The State Government is launching/

promoting medical tourism in the city to attract

visitors from other states. Of the total travellers

that visit the city, approximately 80% constitute

business travellers and the rest represent the

leisure category.


lOf the total existing inventory of

approximately 11,800 12,000 rooms, up-

scale hotels account for the majority at 59%

demand which is largely from business

travellers.

lBeing the commercial and financial hub of the

country, hotels in Mumbai witnessed healthy

occupancy of approximately 76% from 2006

till 2008. While ARR closed at high of INR

11,300 in 2007-08. In a knee-jerk reaction tothe recent Mumbai terror attacks, a drop inSource: CRISIL


In a knee-jerk

reaction to therecent Mumbaiterror attacks, adrop in occupancyrates has beennoticed in the city,thereby forcinghoteliers to discountrack rates in ameasure to maintainminimal occupancylevels and marketshare.


20/40

18


IND IAREPORT



occupancy rates has been noticed in the city,thereby forcing hoteliers to discount rack

rates in a measure to maintain minimal

occupancy levels and market share.

lDuring 2006-07, foreign business travellers

accounted for approximately 30% of the

total room occupancy in up-scale hotels,

followed by domestic business travellers and

meeting participants. However, in the mid-

scale and budget hotels domestic business

travellers accounted for approximately 46%

of occupancy in 2006-07, followed by foreignbusiness travellers.

Outlook

Mumbai is expected to witness an addition of

approximately 6,500 - 6,800 rooms over the

next three years primarily in locations such as

Bandra Kurla Complex, Andheri, Worli, Malad,

Upcoming Room Supply - Mumbai


44%

9%

47%

Mahim and Powai. Mid-scale hotel rooms are

expected to account for 48% of this supply,closely followed by up-scale hotels at 43%. There

is likely to be short term impact due to the

terror attacks, while the economic slowdown in

general is likely to adversely impact hotel

performance and profitability in the medium

term.


Mumbai City Map

Sanjay GandhiNational Park

Vasai Creek

Ambarnath

Badlapur

Dombivli Ulhasnagar

AmbivliKalyan

Bhiwandi

MUMBAI

NAVI

MUMBAI

ThaneCreek

Kolkhe

Village

Shedung

Village

Chinchavli

Bhiwandi

Colaba

Nariman

Point

Parel

Mahim

Khar (E)Bandra (E)

Kurla (W)Santacruz (E)

Ville Parle

Andheri

Jogeshwari

Goregaon

Malad

Borivli

Thane

Bhandup

Belapur

Vashi




21/40

19


IND IAREPORT



NATIONAL CAPITAL REGION (NCR)

India's capital, New Delhi, is a city of historic

importance, a diplomatic hub (represented by

embassies of 160 countries with large expatriate

population) making it an attractive global tourist

destination. Development of business districts

and IT/ ITeS clusters in Gurgaon, Greater Noida

and other parts of National Capital Region

(NCR) has contributed to the growth of

business travellers in this region. Delhi also acts

as a major transit point for leisure destinations

along the northern zone, such as Jaipur, Agra,Shimla-Musoorie, Haridwar-Rishikesh, Kullu-

Manali, etc. In the recent past the city has also

been able to attract domestic and international

tourists as a MICE destination. Government

initiatives to develop heritage hotels, steps taken

to promote tourism, improved connectivity,

along with airport modernisation projects

indicate a healthy growth for the hospitality

sector in the region. With the upcoming

Commonwealth Games in 2010, NCR is

expected to witness an inflow of around

800,000 international tourists and nearly 3.610

million domestic tourists.


lThe total room inventory in the NCR (Delhi,

Gurgaon and Noida) is approximately 12,300

- 12,500 rooms, spread across 113 hotels.

Most of theses are skewed towards the up-

scale category constituting 62% of the total

rooms and are concentrated primarily in

Connaught Place, Dhaula Kuan, Chanakya

Puri and National Highway 8, followed by24% in the mid-scale category in locations

such as Connaught Place and National

Highway 8.

lARR in the NCR grew by approximately 15%

from INR 9,950 in 2006-07 to INR 11,480 in

2007-08 because of increased demand owing

to the economic developments in Gurgaon

and Noida. While the occupancy rates have

declined from 80% to 74% in 2007-08 with

addition of new supply in 2008.


Delhi (NCR) City MapBhagat

Singh ParkLibaspur

St. Nagar

Jahangirpuri

MajlisPark

Kirti Nagar

Old Rajender Nagar

Pusa HillForest

DharamPura

Roop Nagar

Raj Nagar

KarawalNagar Amar

Colony

Dilshad Garden

RajgarhColony

NirmanVihar

Mayur ViharPhase I

Mayur Vihar

SahibabadIndustrial Area

Shahdara

Aghapur

HazipurVillage

YamunaRiver

Jasola Vihar

Okhla

VishwakarmaColony

Pulpehladpur

DLF IndustrialArea

Green FieldsColony

Spring Field Colony

Sector 19Sector 16

Dera

Sangam ViharKhanpur

Vasant Kunj

SafdarganjDevelopment

Area

RamaKrishnaPuram

DefenceColony

LajpatNagar

Kalkaji

Govindpuri

Sector 7

FriendsColony

GHAZIABADPitampura

Ashok Vihar

Daya Basti

ShakurpurColony

ShalimarBagh

Rohini

Inder Enclave

Prem Nagar

Prem Nagar IIPaschim Vihar

Tagore Garden

VikaspuriMohanGarden

Sector - 16B

ajafgarh

Dwarka

Uttam Nagar

Janak PuriHari Nagar

Vishnu Garden

Sagarpur

DelhiCantonment

Palam

NangalDewat Mahiapalpur

RajokriUdyog Vihar

Sector 5

Sushant Lok

DLFPhase 5

Sector 39

Sector 35

Sector 34

Sector 10B

Sector 9GURGAON

NEW DELHI

NOIDA

Sector 23

Mangolpuri

NH 2NH 8

NH 8

NH 10

NH 10


While ARR in NCR

witnessed annual

increase of 15% in

2007-08, occupancy

rates dropped from

80% to 74%.


22/40

20


IND IAREPORT



lBeing the capital city, NCR has high inflow ofcorporate/ business travellers and they

account for nearly 44% and 52% of

occupants in the up-scale, mid-scale & budget

category respectively. Leisure occupants are

high in the mid-scale & budget category to

the tune of 22%.

Outlook

Approximately 12,000 - 12,400 additional rooms

are expected in NCR by 2011, of which nearly

38% is expected to be available in the up-scalecategory, followed by 34% in the mid-scale and

the remaining in the budget category. Majority of

this upcoming supply is likely to be concentrated

in the business areas of Gurgaon and Noida.

With a growing corporate demand for

extended-stay (more than two weeks), service

apartments are becoming a popular option in

the city. NCR is expected to remain a robust

market due to its importance as a commercial

hub as well as the international exposure the

city is likely to witness in light of the upcoming

Commonwealth Games.

Average Room Rate Vs. Occupancy - NCR

30%6,000

3,000

9,000

12,000

15,000

0 0

ARR(inINR)

OccupancyRate(%)

2004-05 2005-06 2006-07 2007-082003-04

60%

90%


Upcoming Room Supply - NCR


37%

34%

29%

PUNE

Pune is one of the fastest growing tier-II cities in

India being an important industrial and

automobile hub. Pimpri-Chinchwad is known as

the industrial hub of Pune housing sectors such

as IT, biotechnology, automobiles and heavy

engineering. These factors have collectively

created demand for quality accommodation forthe business travellers. Pune is also an

educational hub with plenty of reputed

colleges/universities thereby attracting large

floating population. The State Government has

been proactive and provided the necessary

impetus for the above mentioned sectors to

grow within the city. Good connectivity to

Mumbai has also enabled commuters to access

Pune via Mumbai.


lOf the existing room inventory of

approximately 2,300 2,500 rooms, majority

of the budget hotels are located in the CBD

areas of Bund Garden Road, Dhole Patil

Road, Tadiwala Road and the suburban

Kalyani Nagar; while most up-scale hotels are

located along Koregaon Park, Shivaji Nagar

and the Airport.

lOf the existing total room inventory, mid-

scale hotels comprise approximately 49%,

Average Room Rate Vs. Occupancy - Pune

30%

2,000

4,000

6,000

8,000

10,000

0 0

ARR(inINR)

OccupancyRate(%)

60%

90%


2004-05 2005-06 2006-07 2007-082003-04

Source: CRISIL

Source: Cushman & Wakefield

Source: CRISIL


23/40

21


IND IAREPORT



followed by budget hotels accounting forapproximately 32%.

lIn 2006-07 foreign business travellers

accounted for approximately 46% of the

total room utilisation in up-scale hotel

category, followed by domestic business

travellers at 35%.

lARR increased sharply by 21% from INR

7,260 in 2006-07 to INR 8,770 in 2006-07

on account of limited supply to cater to the

business travellers. On the contrary theoccupancy rates dropped by 3 points to 78%

in 2007-08.

Outlook

Pune is expected to witness supply of

approximately 3,700 3,900 hotel rooms in the

span of next 3 - 4 years. This supply is expected

to be available across 21 hotels located primarily

Upcoming Room Supply - Pune


51%

6%

43%

in areas such as Hinjewadi, Nagar Road and

Koregaon Park. Approximately 51% of thissupply would fall in the upscale category

followed by 43% in the mid- scale category.

Infrastructure improvement initiatives by the

state government coupled with comparatively

lower real estate costs, are expected to

encourage the development of additional rooms

in the near future to tap demand.


Pune City Map




24/40

22


IND IAREPORT



RESEARCH FINDINGS

According to Cushman & Wakefield (C&W)

Research estimates, the organised hotel industry

constitutes approximately 72% based on the

hotel categories considered for our study (5

star deluxe, 5 star, 4 star and 3 star). This

translates to approximately 46,839 rooms as

organised of the total inventory of 65,17411

rooms across the eleven major cities

considered for the study. Of the organised room

inventory, approximately 64% is controlled by

large hotel operators such as the Taj Group, theOberoi Group, the ITC Group, Leela Hotels and

Bharat Hotels, etc. Major international chains

(also part of the organised section) such as the

Hilton Group, the InterContinental Group,

Hyatt International Hotels and Resorts, Marriott

Hotels and Resorts, Le Meridien Hotels &

Resorts, etc., are all represented by management

or franchise contracts in India. Several others

such as the US-based Four Seasons Hotels and

Resorts, Hampton Inn Hotels & Suites, Amanda

Hotels and Berggruen Hotels, etc., are all in the

process of making an entry into India over the

next few years, primarily through management

contracts.

NCR, Mumbai, Bangalore and Chennai together

account for approximately 62% of the existing

rooms under the organised section. At present,

however, a shortfall of rooms has caused the

average ARR to settle at approximately USD 200

per night, which is not far beyond ARR in Paris12

(USD 280) and Dubai (USD 290) . Demand for

rooms across various cities can be ascertained

in connection with other closely related factors

mentioned below besides the supply data:

lExisting Room Inventory/ Stock

lSupply, Occupancy and ARR

lHuman Resource Availability

lCentral Government Policies/ Local

Administration

lInvestment for Infrastructure Development

lSocio-Economic Climate

Existing Room Inventory

The existing room inventory table indicates the

supply of eleven cities across the star categories

under consideration. The top four cities in theupscale hotel room inventory are NCR, Mumbai,

Bangalore and Goa. NCR and Mumbai are hugely

dependent on business travellers, both foreign

and Indian corporations. NCR also has the

maximum number of rooms in mid-scale

category and is closely followed by Mumbai and

Chennai. The availability of budget rooms is

highest in Bangalore as the city is a frequented

destination by both domestic business travellers

and MICE tourists and also due to influx of new

budget category hotels this year. Bangalore is

followed by Goa and Chennai in budget room

inventory.

Supply, Occupancy and ARR

With the growing importance of India in the

global economic arena and the corresponding

growth in in-bound and domestic travellers,

many developers viewed hospitality sector as a

lucrative asset class. To strengthen their position

further, most have also associated with reputed

hotel management chains in order to

substantially boost their operations and increasetheir profitability. During 2008-11, additional

52,200 hotel rooms are expected to be available

across the 11 cities considered for this study. Of

this, approximately 28,012 rooms, representing

around 54% of the total room supply of the

study, belong to the up-scale category. However,

due to sky rocketing land costs and rise in

construction costs in recent times, only up-scale

hotels are likely to provide substantial returns

and reduce break-even period. Bangalore tops

this list with the highest number of up-scale

rooms (6,356), followed by NCR (4,600) and

Hyderabad (3,554).

Existing Vs. Upcoming Room Supply

5,000

25,000

20,000

30,500

35,000

0

Numberofrooms

10,000

15,000

Existing Rooms till September 2008 Upcoming Rooms till 2001




25/40

23


IND IAREPORT



Based on our research, the demand forhospitality industry in the organised sector for

the categories under consideration, is likely to

grow in the range of 8-20% per annum from

2008 to 2011, facilitated by supply growth of

approximately 12 39%per annum over the

same period for the sample cities. NCR (20%),

Mumbai (15%) and Bangalore (14%) are

expected to witness a considerable

compounded annual growth in demand from

2008 -2011. It can also be noticed that supplygrowth is phenomenal in Tier I & II cities like

Pune, Bangalore, Hyderabad, Kolkata, NCR, and

Ahmedabad. While the current occupancy rate

in Chennai is 75%, the significant addition of

supply in the coming years is likely to result in a

decelerating demand by 3% Y-o-Y for the next

three years, thereby directly impacting the

occupancy rates.

Human Resource Availability

The hotel industry requires skilled personnel

and insists on their staff possessing basic

certification in operation areas like

housekeeping, front office, stores and accounts,

F&B services, kitchen, engineering and

management to name a few. Like any other

service industry, the hospitality industry too

banks on trained talent pool to offer flawless

service to its guests. However, the availability

and retention of this talent pool has become a

prime agenda for the organised sector today. In

Annual Enrollment at Institute of

Hotel Management (IHM)

Pune

Mumbai

Jaipur

Goa

Chennai

Ahmedabad

0 20 40 60 80 100 120 140 160 180

PG Diploma M. SC B.SC Diploma Cra ft smansh ip

B.Sc in Hospitality and Hotel Administration seems to be the prefferedcurriculum by the Industry

this study, C&W Research has emphasised on

both talent availability and manpower demand

for the cities under consideration. The

Government recognises organisations, such as

the Institute of Hotel Management (IHM) with

its branches at Hyderabad, Delhi, Lucknow,

Chennai, Mumbai, Jaipur and Ahmedabad, to

name a few, that offer diploma and post

graduation courses. Further, graduation courses

in Hotel Management & Catering Technology

(BHMCT) recognised by the All-India Council of

Technical Education (AICTE) also churn out over

thousand graduates each year. Various StateUniversities and private colleges across India also

augment the overall enrolment into hospitality

courses.

Among the cities under consideration, Mumbai,

followed by Bangalore, Chennai, Kolkata,

Hyderabad and Delhi, emerge as the front

runners offering supply of skilled human

resource pool. Naturally these cities are likely to

absorb the maximum trained manpower in their

upcoming hotels. According to C&W Research,

the ratio of additional room inventory tomanpower requirement is 4:7 for up-scale hotels,

Source: AICTE; Cushman & Wakefield Research

Legend

Market Rising Market Falling Market Stagnant, Market Stagnant, Market Stagnant likely to Strengthen likely to Weaken

Source: CRISIL; Cushman & Wakefield Research

City Performance Indicator

Hospitality Parameters Ahmedabad Bangalore Chennai Goa Hyderabad Jaipur Kochi Kolkata NCR Mumbai Pune

ARR

Occupancy Rate

CAGR in room supply22% 30% 14% 12% 29% 12% 18% 27% 26% 16% 39%

from 2008 - 20011

CAGR in room demand10% 14% -3% 9% 8% 12% 13% 12% 20% 15% 11%

from 2008 - 20011

The hospitality

sector in India is

likely to be one of

the highest

employment

generators in

2009-10.


26/40

Manpower: Demand Composition by 2011

Cochin

2%

Hyderabad

11%

Goa

6%

Chennai

7%

Delhi (NCR)

22%Bangalore

20%

Jaipur

3%Kolkata

5%Mumbai

13%

Pune

7%

Ahmedabad

3%

24


IND IAREPORT



while the same for mid-scale and budget hotelsis 5:6. Thus the manpower requirement by 2011,

based on the estimated room supply for the

period under consideration would be

approximately 77,000 79,000 jobs for the 11

cities and star categories under consideration.

NCR followed by Bangalore, Mumbai and

Hyderabad are likely to be future destinations

for potential employment creation in the

hospitality industry. As per Ma Foi Management

Consultants, the hospitality sector in India is

likely to be one of the highest employment

generators in 2009-10.

Government Policies

Hospitality industry has received the necessary

impetus largely based on participation from the

government in terms of approval of tourism

projects and allocation of the necessary funds.

This is likely to provide a positive impact on the

tourist inflow. To gauge the government

participation Cushman & Wakefield Research

considered the average amount sanctioned per

project state-wise as well as the total number of

projects sanctioned, during 2006-07 for the 11

cities under consideration. Based on the total

number of projects sanctioned and the total

amount sanctioned the average amount

sanctioned per project was arrived at; Andhra

Pradesh tops all states (INR 514 million)

followed by Delhi (INR 480 million) and close

behind was Uttar Pradesh (INR 476 million).

Kerala received the maximum number (18) oftourism projects in 2006-07, with a total

13sanction of INR 447 million . Maharashtrafollowed with close to 13 approved tourism

projects with sanctions totalling approximately

INR 284 million. In addition to the amount

sanctioned for the enhancement of tourism

development, state-wise tourism/hotel policies

also play a crucial role in the development of

new hotels by expediting processes such as land

allotment, tax rebates and others.

Amongst the states considered in our study, the

hotel policies framed by the Government of

Rajasthan and the Government of Uttar Pradeshwere found to be most inclined towards

fostering new hotel development in the

categories under consideration. Presence of

industry bodies such as Federation of Hotel &

Restaurants Association of India (FHRAI) and the

overall political stability across all 11 cities also

factor in the critical mass formation in the hotel

industry.

E. Investment for Infrastructure

Development

(I) Foreign Direct Investment (FDI) Inflow

Rapid growth in the hospitality sector may also

be attributed to the increasing FDI inflow across

Indian cities over the past few years. This has

been a major contribution towards the

development of the realty sector (commercial,

residential, and retail segments) in the last one

year. India's hospitality sector is expected to

witness an investment to the extent of14

approximately USD 111 billion in the next two

years. Marriott International, Hilton,

InterContinental, Accor, Berggruen and

Hampshire are a few global brands that have

announced major plans of investing in India.

For the regions under consideration, the states

of Maharashtra & Union Territory of Dadra and

Nagar Haveli have witnessed maximum

cumulative FDI inflow across all sectors to the

extent of approximately USD 2.43 billion during

April 2000 to September 2008. The southern

states of Karnataka, Andhra Pradesh and Tamil

Nadu, as well as the western state of Gujarat

have seen a cumulative FDI inflow in the range of

USD 1.6 -1.8 billion for the same period. This is



27/40

25


IND IAREPORT



followed by Delhi, parts of UP as well asHaryana; predominantly the NCR shows a

cumulative FDI inflow to the extent of USD 1.2515

billion in the same timeframe .

Various developers/ investors have invested in

the hospitality sector this year and there are

several projects planned across India. Most of

these investments are through joint venturesbetween the developer/ investor and the

hospitality group. The capital required for such

projects is also raised through private equity

funding. The table provided below captures few

of the major investment deals in the hospitality

sector in 2008.

Major Hospitality SPV Deals

Investor/Developer Entity Invested Quantum (USD)

Hospitality Group/ Deal Type Planned/ Investment Project Type City

Vipul Ltd Sarovar Hotels & Tie-up Planned 58 million 4 star hotel Mohali, Amritsar,Resorts Ludhiana, Siliguriand Bhubaneshwar

Jaypee Group Six Sense Spa, Thailand JV Planned 35 million Resort Greater Noida

E.C.C. Carlson Hotels Tie-up Not Available Not Available Not Available ZirakpurInfrastructure Worldwide (Chandigarh)Pte Ltd

Parsvanath Hotels Bangalore based Royal JV Planned 116 million 3, 4 & 5 star hotels Across IndiaLtd Orchid Hotels and serviced

apartments

Royal Orchid US based Wyndham Tie-up Not Available Not Available 4 star hotel Across IndiaHotels Ltd (ROHL) Hotel Group

Yatra Capital Platinum Hospitality PE Invested 15 million Hotel and serviced BangaloreLimited Services apartments

Uppal group Marriott International Tie-up Invested 116 million 5 star hotels Gurgaon andChandigarh

Clearwater Capital SPV formed by BSEL PE Invested 49% stake in Business Hotel PunePartners Infrastructure Realty Ltd, SPV

Unity Realty andDevelopers Ltd andKamat Hotels (India) Ltd

City Group Nitesh Estates PE Invested 100 million Business Hotel BangaloreProperty Ventures

Yatra Capital Jalan Intercontinental PE Invested 7 million Business Hotel KolkataLimited Hotels Pvt Ltd

Japan's Shinsei Bank Lemon Tree Hotels PE Invested 30 million Business Hotel Not AvailableLimited and KotakRealty Fund jointinvestment

(II) Infrastructure Factors

Road Connectivity: According to 'Indian States at

a Glance 2006-07, Performance, Facts and16

Figures' ; physical infrastructure such as road

connectivity is an important determinant of

economic growth. As per the Economic Survey

2003-04, roads carry 85% of passenger traffic

and 70% of freight traffic in the country. Density

of roads has been considered in each state (for

the cities we have undertaken for our study) to

understand the links that have been establishedthroughout the area. The network of roads

within the state are closely associated with the

spread of development in the state.

The NCR has the maximum number of National

Highways passing through the region, followed by

Bangalore and Ahmedabad. Similarly in case of

distance covered, the National Highways passing

through NCR ranks first followed by Bangalore

and Chennai. As per the state-wise data

pertaining to density of roads (road length/1,000

sq km of area) in the year 2002, Delhi (NCR) is

way beyond other states in this respect.


Exchange Rate: 1 USD = INR 50


28/40

26


IND IAREPORT



Rail Connectivity : Rail routes help connect thestate with other parts of the country as it is one

of the most commonly used transport services

in India. As per rail routes for each 1,000 sq.km

within the regions considered by Cushman &

Wakefield Research, NCR heads all the other

states, followed by West Bengal. In terms of

inter-connectivity amongst all the 11 cities taken

for the study, the number of sub-stations in each

of these cities was another crucial factor.

Mumbai, followed by the NCR, came up as the

highest ranking cities for these parameters.

Air Connectivity : Privatisation in the aviation

industry, coupled with the entry of private

players (mostly budget airlines) and an open sky

policy has enabled domestic airlines to fly on

international sectors. All these factors combined

have led to a stupendous increase in air travel

within the country. Besides Delhi and Mumbai

(accounting for nearly 49% of all passenger

boarding and originations in the domestic sector

and almost 65% of all international travel in

India), Hyderabad and Chennai are other tier-II17

cities with good air connectivity among all the

11 cities considered for the study. Keeping in

mind the need for such infrastructure, the

government has initiated the development of 47

airports, including 40 brownfield and 7 greenfield

projects across tier-I, II and III cities of India.

Socio-Economic Climate

(I) Gross State Domestic Product (GSDP)

According to 'India States at a Glance 2006-07'

the GSDP is the aggregate of the economic

value of all goods and services produced within

the geographical boundaries of the state during

the financial year. It is a good indicator of the

level of economic activity as it measures the

total income generated within the state.

Maharashtra (represented by Mumbai & Pune)

ranks first on GSDP measured during 2005-06.

This is followed by West Bengal (represented by

Kolkata) amongst all the cities considered for

our study.

(II) GSDP for Manufacturing and Services Sector

Manufacturing is no doubt one of the important

economic activities for any state. Generally, a

state having a well-diversified industrial sector islikely to show more growth prospects over a

period of time than others. State governments

have taken several initiatives to attract

investments from within the country as well as

foreign funds/companies to stimulate the state

economy. Maharashtra and Gujarat are two

states that have witnessed significant growth in

the manufacturing sector in recent past.

The services sector is witnessing a robust

growth across all regions with more than half of

the country's GDP coming from this sector.Transportation, storage and communication,

trade, hotels and restaurants, finance, banking

and insurance, real estate as well as public

administration are the activities included in the

service sector. Trade, hotels and restaurants

contribute approximately 30% share to the

sector. Maharashtra has seen the highest growth

in the service sector amongst the centres

considered for this study followed by West

Bengal.

(III) Commercial Induced Business Demand

Commercial induced business demand is one of

the critical demand drivers for the hospitality

sector. To asses this factor we have taken into

consideration the office supply as well as

absorption for the year 2008. It can be noticed

that for the past 4-5 years the commercial office

sector has been dominated by the exponential

growth of the IT/ ITeS sector, across all

prominent as well as Tier I and II cities in India.

NCR (14 million sq.ft.), Bangalore (11 million

sq.ft.) and Chennai (10 million sq.ft.) havewitnessed a good quantum of commercial office

space development during 2008. Absorption in

the commercial office space was largely

accounted by IT/ITeS, BFSI and telecom sector

across the major Tier I & II cities with Bangalore

witnessing the maximum absorption followed by

NCR and Mumbai. Cushman & Wakefield

Research estimates commercial office space

demand to be approximately 180 million sq.ft.

over the next three years which is likely to have

a positive impact on hospitality demand as well.

Commercial officespace demand is

expected to be

approximately 180

million sq.ft. over the

next three years

which is likely to

have a positive

impact on hospitality

demand as well.


29/40

27


IND IAREPORT



External Drivers and Industry Potential Analysis

Industry Potential Scoring

ExternalDriversScoring

South 0; North 0; West 1; East 1 South 3; North 1; West 1; East 0High

High

South 1; North 1; West 1; East 0 South 0; North 0; West 1; East 0

Pune

Kolkata

Chennai

Hyderabad

NCR

Mumbai

Bangalore

GoaJaipur

Ahmedabad

Cochin

1

2

3

4

5

5 4 3 2 1

Low


Note:

Industry potential is assessed by considering existing room inventory and upcoming room supply by 2011 across up-scale, mid-scale and

budget category.

External drivers is assessed by considering factors such as skilled Human resource availability in the hospitality sector, Government

policies/ regulations related to hotel development, Investment for infrastructure development, and Socio-economic parameters as

applicable in each of the cities.

Tier-I and tier-II

cities including

Mumbai, NCR,

Bangalore,

Hyderabad and

Chennai offer thebest macro-level

environment for

hotel industry

development in

India, as they are

supported by high

industry growth and

are best positioned

to benefit from

c&w hospitality report - the voyage

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