Room for more: hotel industry to see 15,600 additions in 2010

Written by Shweta Bhanot | Mumbai | Updated: Jan 1 2010, 04:32am hrs
The coming year could see a fairly large addition to the inventory of hotel rooms in the country with over 15,600 rooms expected to be created across hotel chains. Thats about a 15% increase with hotel industry sources estimating the current inventory at just over one lakh rooms. The major hotel chains such as the Indian Hotels Company Ltd (IHCL), EIH Ltd, Hotel Leelaventures and Marriott International Inc will between them build a dozen new properties accommodating just over 3,000 rooms. The remaining rooms are being added by chains such as Accor, Hyatt, IHG and budget chains like Berggruen Hotels will be spread over a much larger number of properties. We may see as many as 92 hotels or 15,627 rooms being created if the plans of all the hotel chains, both domestic as well international, come through, said P R Srinivas, industry lead, tourism, hospitality and leisure, Deloitte in India.

Srinivas added that India has close to 415 projects or 68,480 rooms under various stages of development and 41% of the said projects are expected to start adding to existing inventory from 2010. However, it could take a while for the supply to catch up with the real demand given the shortage of one about lakh rooms in the country, he said.

Further, of the total pipeline rooms, 45% are located in the top five markets in the country including Bangalore , Pune, Mumbai, Chennai, and New Delhi. Many of the projects in these cities had been stalled due to the economic slowdown but with the environment improving, these should now be completed. Besides, the Commonwealth Games, being held in the capital late next year, New Delhi alone has over 6,000 rooms under construction. Chennai and Pune are not behind and expected to significantly add to the suplly of rooms next year. Chennai has an actual room inventory of 2,142 while Pune has 536 rooms at present, according to a recent Morgan Stanley report. A large chunk of the hotel supply has been pushed back due to a slowdown in global economies, regulatory and construction delays, high real estate prices, and a lack of easy bank credit, said the Morgan Stanley report. However, industry watchers believe that as supply increase, the the revenue per available room could drop which, in turn, could prompt hoteliers to go slow on their projects.

Crisil had estimated an addition of 14,890 rooms between financial year 2010-11 and 2011-12 but thanks to the slowdown, that estimate has now more than halved to just 6,214 rooms.

Nevertheless, the Reserve Bank of Indias recent policy change, by which hotel companies have been excluded from the purview of commercial real estate exposure, will mean cheaper bank credit to the sector.

Data put out by Lodging Econometrics and STR Global, shows that India s hotel pipeline is the second largest in the Asia-Pacific region and the largest after China, making up 23% of the total projects in the Asia Pacificregion and accounting for 16% of the total rooms.