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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
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INDIA REPORT | JANUARY 2009
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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A RESEARCH PUBLICATION
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THEVOYAGE - An exploration of key hospitality markets in India
INDIA REPORT | JANUARY 2009
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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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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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
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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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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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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).
Hospitality Dynamics
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%
ARR Low ARR High Occpancy
Upcoming Room Supply - Bangalore
Upscale Midscale Budget
63%
6%
31%
Source: Cushman & Wakefield Research
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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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
Upscale Midscale Budget Upcoming Supply Zone
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
ARR Low ARR High Occpancy
2004-05 2005-06 2006-07 2007-082003-04
Source: Cushman & Wakefield Research
Source: CRISIL
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Upcoming Room Supply - Chennai
Upscale Midscale Budget
57%
8%
35%
Hospitality Dynamics
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
Upscale Midscale Budget Upcoming Supply Zone
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
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
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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.
Upscale Midscale Budget Upcoming Supply Zone
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%
Hospitality Dynamics
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
Source: Cushman & Wakefield Research
Tourism remains
the main
contributor to the
state economy in
Goa.
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Average Room Rate Vs. Occupancy - Hyderabad
0 0
ARR
(inINR)
OccupancyRate(%)
3,000
4,500
80%
60%
40%
100%
ARR Low ARR High Occpancy
2004-05 2005-06 2006-07 2007-082003-04
20%
7,500
6,000
9,000
10,500
1,500
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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%
ARR Low ARR High Occpancy
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.
Hospitality Dynamics
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
Upscale Midscale Budget
61%
4%
35%
Source: CRISIL
Source: CRISIL
Source: Cushman & Wakefield Research
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Hospitality Dynamics
lThe existing hospitality supply in Jaipur
consists of 4,000 4,200 rooms spread
across 71 hotels.
Upscale Midscale Budget Upcoming Supply Zone
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
Upscale Midscale Budget
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
Source: Cushman & Wakefield Research
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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.
Hospitality Dynamics
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.
Upscale Midscale Budget Upcoming Supply Zone
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%
ARR Low ARR High Occpancy
Upcoming Room Supply - Kochi
Upscale Midscale Budget
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.
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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.
Hospitality Dynamics
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%.
Upscale Midscale Budget Upcoming Supply Zone
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%
ARR Low ARR High Occpancy
Source: Cushman & Wakefield Research
Source: CRISIL
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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%
ARR Low ARR High Occpancy
Upcoming Room Supply - Kolkata
Upscale Midscale
82%
18%
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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.
Hospitality Dynamics
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
Source: Cushman & Wakefield Research
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.
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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
Upscale Midscale Budget
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.
Upscale Midscale Budget Upcoming Supply Zone
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
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
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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.
Hospitality Dynamics
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.
Upscale Midscale Budget Upcoming Supply Zone
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
Source: Cushman & Wakefield Research
While ARR in NCR
witnessed annual
increase of 15% in
2007-08, occupancy
rates dropped from
80% to 74%.
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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%
ARR Low ARR High Occpancy
Upcoming Room Supply - NCR
Upscale Midscale Budget
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.
Hospitality Dynamics
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%
ARR Low ARR High Occpancy
2004-05 2005-06 2006-07 2007-082003-04
Source: CRISIL
Source: Cushman & Wakefield
Source: CRISIL
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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
Upscale Midscale Budget
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.
Upscale Midscale Budget Upcoming Supply Zone
Pune City Map
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
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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
Upscale Midscale Budget
Source: Cushman & Wakefield Research
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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.
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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%
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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
Source: Cushman & Wakefield Research
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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.
Source: Cushman & Wakefield Research
Exchange Rate: 1 USD = INR 50
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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.
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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
Source: Cushman & Wakefield Research
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