Robust growth for hospitality sector: NCR, Mumbai to give 27000 keys by 2008

 Chennai: Braving the economic slowdown, the hospitality sector in Mumbai and Delhi-NCR together will produce 26,970 keys in the next three to five years.

According to ‘Asia Hotels View 2014’ by Cushman & Wakefield, the world's largest privately owned real estate firm, over the next three to five years Mumbai will have 5,919 additional hotel rooms, while NCR will give 18,064 keys.

Expansion in NCR will see the presence of brands such as JW Marriott, MGM Aloft, St. Regis, Conrad Hilton, Radisson Blu, Ibis and Lemon Tree, while for Mumbai, JW Marriott Sahar Airport, Conrad Hilton in Juhu, Radisson Blu in Powai, IBIS in CST Mumbai and Lemon Tree are some of the possible addition in the coming months.

Akshay Kulkarni, Regional Director of Cushman & Wakefield's Hospitality sector group across South Asia and Southeast Asia said, “He further adds, “There seems taken comparatively higher growth in demand in the NCR region against Mumbai and while the inventory in NCR is higher than in Mumbai, occupancy shows growth because there is pent up demand being captured by the unorganized sector, which will move to the branded section in NCR. The delay in the inventory coming in NCR is also going to support growth of ADR. In 2014, the second half should see improved business activity as well as inbound travel due to elections and stabilization of global financial health. Improved perception of safety and security and stabilize political climate should also benefit in enhanc­ing the business volumes.”

Mumbai

As of 2012, the total organised inventory accounted for over 14,000 keys. The inventory is primarily dominated by the luxury segment with 33%, followed by 26% in the mid scale segment, 21% in the budget segment, 12% in the upper upscale segment and 8% in the upscale segment. Five new hotels opened for business in 2012, adding a total of 1,193 keys to the existing room supply, namely Sofitel Mumbai in BKC with 300 keys, Shangri-La (to be rebranded) in Lower Parel with 390 keys, Ginger in Andheri with 116 keys, Country Inns and Suites with 94 keys, and Ibis and Royal Tulip in Navi Mumbai with 196 and 97 keys, respectively. 2013 has seen the introduction of only Residency Sarovar Portico in Malad with a total of 71 keys. The majority of the demand is driven by the business and transient segment, with an almost 70% share of total demand. In 1H 2013, Mumbai’s occupancy is estimated to have increased by 2 percentage points to 65% over.

The year 2013 is set to see some major infrastructure facilities transform Mumbai. In particular, the new airport terminal is expected to start operations soon and should be able to handle up to 40 mn passengers annually. Further improvements include the proposed Mumbai Metro, which is expected to be operational beginning with Line 1 (Versova-Andheri-Ghatkopar Corridor) by October 2013.

Hotel supply increased in 2013 and is set to continue to grow in 2014. Next year, we would expect to see major additions to the city’s hotel inventory, such as JW Marriott Sahar Airport with 525 keys, Conrad Hilton in Juhu with 275 keys, Radisson Blu in Powai with 335 keys, IBIS in CST Mumbai with 196 keys, and Lemon Tree with 298 keys. With further increases in supply, ADR and AOR are likely see a drop in the short-term. In fact over the next three to five years Mumbai will have 5,919 additional hotel rooms. The average occupancy rate will be 61% while the average daily rate will be Rs 8,906 approximately

NCR

NCR currently has over 23,500 units in the organized and unorganized segments, combined. Seventy-five percent of total units are in the organized sector. Micro-market wise, NCR has 65% of its total organized inventory in Delhi, 21% in Gurgaon, 5% in Noida and Greater Noida, 3% each in Manesar and Ghaziabad, and 2% in Faridabad. In 2012, the total inventory went up by 9%, that is, approximately 1,500 units entered the market last year. 

Prominent new entrants were Park Plaza by Sarovar Hotels and Kempinski Hotel in Delhi, Pullman Hotel and Double Tree by Hilton in Gurgaon, Radisson Hotel in Ghaziabad and Savoy Suites in Manesar.

Of the total NCR hotel inventory, the luxury segment contributes the highest share of about 34% of the total inventory, followed by midscale with 30%, upscale with 16% and upper upscale with 12%. The budget segment has the least contribution, amounting to only 8% of the total inventory. 

NCR has a robust pipeline of upcoming hotels with approximately 18,000 keys expected to enter the market over the next five years. The majority of this new supply is expected to be in Delhi (34%), given the development of the Hospitality District near the international airport. 

The opening of a number of new hotels in this area has been delayed by a few months because of safety and security concerns raised by the Airport Authority of India (AAI). Noida has a share of about 25%, Gurgaon with 21%, Greater Noida 13%, Manesar 4%, and Faridabad 3% of the total upcoming supply in the NCR.

Historically, NCR has been a lucrative market for most hospitality players, which can be ascertained by the quantum of inventory – existing and upcoming. The Hospitality District at DIAL 12 will have an influx of fresh inventory in NCR in the second half of 2013, after obtaining clearance from the AAI. A total of over 4,200 keys are expected to open in the next five years in the Hospitality District alone.

Delhi, the capital city of India, has outgrown its boundary as an agglomeration to its suburbs to accommodate its increasing population and livelihood. However, the demand of hospitality accommodation remains strong in the prime areas in the city. As the availability of land continues to be a constraint in these areas, this has triggered hotel development in micro-markets like Noida, Gurgaon and Faridabad.

ADR and AOR might experience further decreases in 2013, given the economic instability in the light of the impending General Elections due in 2014, coupled with the strong pipeline of new hotel inventory entering the market. The stiff competition, together with lower AOR, is likely to put downward pressure on ADR this year. 

With such a scenario, budget and midscale segment hotels are likely to perform better than the upper upscale and luxury hotels, given their flexibility to play in a lower price segment. In fact over the next three to five years NCR will have 18,064 additional hotel rooms. The average occupancy rate will be 61% while the average daily rate will be Rs 8,906 approximately.

Despite the recent rout in Asian financial markets and cuts in GDP forecasts, long-term growth prospects for Asian economies remain structurally healthy and a repeat of the 1997 financial crisis is unlikely. Market-wide Asian hotels have had positive RevPAR growth in 2012, although at a slower pace compared to 2011. So far in 2013, hotel performance remains a mixed picture of growth, consolidation and decline in different markets.