India?s hospitality sector is definitely in boom mode. There is an annual increase of 12-13% in foreign business traveller and tourists, and domestic travellers too are contributing significantly. According to Anuj Puri, country head and managing director, Jones Lang LaSalle Meghraj (JLLM), ?We saw an influx of above two million foreign travellers in the first half of 2007. Projections indicate that the rate will increase to 10 million by 2010 and revenues generated by the hospitality sector showed an increase of almost 15% over what they were two years ago. Tourism now contributes as much as 5.9% of India?s GDP, and accounts for 1.18% of its overall FDI.?

In a bid to cater to this growing demand, Oberoi Construction Pvt Ltd which has recently acquired 100 acres in Pune to develop a township is now eying cities such as Hyderabad, Bangalore, Chennai and Delhi. It plans to acquire a total of 500 acres across these four cities.

Says Vikas Oberoi, CMD of the company, ?Five star hotels are a good way of branding any destination. Because, the areas located around a five star hotel suddenly witnesses a spurt in property prices. Hence, we are also planning to include a four star hotel project as part of our upcoming Oberoi Splendour residential project in suburban Andheri.? He adds that the company is immediately starting its five start deluxe hotel in Goregaon, whereas, the two hotel projects in Mulund will start soon.

Hospitality has always been a hub for a lot of tourists and also to properties for investment and utility. Nowadays, all corporates are putting their staff in various hotels whereby giving those users who are interested in real estate an opportunity to scan and search for their own requirement in different places.

Mumbai being a hub for the above gives an individual the opportunity to do so. Royal palms which already has three categories of hotels is coming up with three more hotels in the near future catering to different categories of people. According to Dilawar Nensey, joint managing director, Park Plaza Royal Palms, ?This is to provide them with ample wonderful time apart from showcasing a glimpse of the estate as we have properties which can cater to all classes of the society ensuring that a buyer gets his asset a profitable return enhancing his appreciation.?

Further, Nensey added that the hospitality industry is an evergrowing industry. In fact, every category of hotel put up in the city has been posting good business. Since we have the best expertise and deliverance in the industry we plan to expand the same in the property with variable amenities across categories of hotels, which are equidistant to the central and western suburbs, and close proximity to the international airport. The Park Plaza is an example of this, with 95% occupancy rate of the total 223 rooms. Besides, there are 418 rooms in Imperial Palace and 110 villas in Palms Hotel.

According to Nensey, ?We definitely would expand our real estate market both in residential and commercial because of the hotel industry within the campus. Royal Palms does not have to plan prices, since, an average appreciation of 10 to 15% per annum is guaranteed. With more developers entering into ventures with global brands for luxury and budget range hotels, there is a clear cut upsurge in hospitality activities in India.

Consider this. Mumbai-based JLLM is planning to introduce Jones Lang?s hotel division from the US, and service Jumeirah hotels of Dubai and Dusit Hotels from Thailand. Besides, Ansal API has floated a special purpose vehicle (SPV) with Ambience Hospitality Management to build 30 hotels at various locations at an investment of Rs 2,000 crore. It includes Greater Noida, Mohali, Jaipur, Jodhpur, Amritsar, Lucknow, Ghaziabad apart from South India. The overall project encompasses golf resorts, clubs, spas and palace hotels apart from the regular business and leisure hotels and serviced apartments.

Further, the Ascott Group from Singapore has strengthened its presence in India after acquiring its fourth property, the Citadines Chennai OMR Gateway. Emaar has already signed up with Premier Inn for 80 budget hotels. Accor of France is introducing its Formule 1 brand of budget hotels in the next decade. Lemon Tree is also planning a Rs 1,000 crore investment in 12 Indian cities to add 1,700 hotel rooms to the market, while Taj Hotels has seven of its budget range Ginger hotels, and there are 29 more hotel projects in the pipeline.

Besides, the Marriott chain will create a niche for itself in the hospitality sector as it seeks to add 3,324 rooms by 2010 through three additional JW Marriott hotels and a Ritz-Carlton in the luxury bracket. Further, it plans a Marriott Hotel and Resort and a Renaissance in the deluxe category, one Marriott Executive Apartment and eight Marriott Courtyards in the mid-segment. These chain of hotels will come up in Bangalore, Gurgaon, Hyderabad, Pune, Noida, Chennai, Mumbai and Kolkata.

Further, The Metropolitan, Delhi, broke off with Japan?s Nikko Hotels International to tie up with Summit Hotels and Resorts, a division of the Preferred Hotel Group of Chicago. Soon, the Metropolitan will be extending its network to Bangalore, Hyderabad, Chennai, Kolkata and Mumbai. This is reflective of the investment opportunities in most of the 50 cities identified by JLLM. With bearish trends penetrating the property market, it could be the right time to build up one?s asset portfolio.

Moreover, with 100% FDI now permitted in the Indian hospitality sector, one could expect a vastly accelerated rate of development in hospitality projects. However, the current scenario is not very encouraging. ?There is a demand supply mismatch in the sector which is why one will not find many five star hotels in Mumbai. Only if a five star hotel is built with five times more than its current room capacity, then it is likely for the room rates to come down,? opines Oberoi.

Major tie-ups between national and international players notwithstanding, skyrocketing real estate costs in the locations that really matter to this sector have discouraged many aspiring developers. The major projects that could take the edge off the shortfall are still only on paper. Less than a third of the rooms the sector requires to meet the current demand are yet to come up.

Apart from this, Real Estate Investment Trusts (REITS) are still a grey area in the Indian context. Plans to introduce these investment vehicles in India are at a basic stage.

If introduced, they would definitely boost developers? confidence in terms of availability and sustainable flow of funds. REITS would certainly do a lot to raise the sector?s profile in the eyes of the international investor community, which still tends to view the country?s investment environment as immature and inefficient. However, REITS would only marginally alleviate developers? basic misgivings as far as the enormous real estate costs are concerned.

Rajiv Bhatia, CEO, InOrbit Mall ? a K Raheja Group enterprise says, ?I think there is a sense of inevitability of the arrival of REIT?s in India although the timing can be debated. I believe that there will be several positive impacts after the arrival of REIT?s into the country, including the introduction of global best practices across the full spectrum of real estate design, leasing and operations.?

REITs also allow retail/investor level investment participation in large assets like malls, office buildings, hotels etc. A spin off of this is likely to be more efficient price discovery, business discipline and efficient business models and asset liquidity. Their introduction is also likely to trigger a level of consolidation in the industry and a drive to build operating scale.

The global REIT industry across all asset classes now stands at approxImately $750 billion, and is likely to exceed $1 trillion over the next few years. Introduced in the US in the 1960s, more than 20 countries now have REIT?s or similar structures. Currently, only a small number of global REIT?s are shopping centre specific, a scenario that is likely to change as shopping centres get developed in emerging markets.