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01 Jun 2014 Editorial Team

Unlike real estate, hospitality enjoys industry status, which provides it access to easy and cheap funding. Yet, this sector has taken a hit owing to the global economic downturn. The silver lining: good times appear to be on the way. According to a Cushman & Wakefield report, the hospitality sector is set to see a rise of over 65 per cent in total hotel inventory by 2017 52,000 new hotel rooms are expected to come on stream in India's top eight cities during 2013-2017 (see table on 'Total hotel inventory by 2017'), and projects that have been delayed in the past two years are also expected to get completed.

Negative backdrop
Despite this positive outlook, right now, there is a massive oversupply. "Supply is a little disproportionate to demand," says Abhijeet Umathe, National Head, Hospitality and Leisure, Knight Frank, adding that while demand has only doubled, supply has quadrupled.

Meanwhile Sanjay Sethi, Managing Director and CEO, Berggruen Hotels Pvt Ltd, says, "We are not a consumer-driven business, like retail or corporate-driven businesses. But how the corporate segment IT, consultancy services, automobile industry performs is directly proportional to how we will perform."

While Anshuman Magazine, Chairman & Managing Director, CBRE South Asia Pvt Ltd, believes average room revenues (ARRs) have not really gone to the level owing to the oversupply, he highlights the irony in India: "If you look at the population and the size of the country and the number of rooms, on paper we are completely undersupplied. But building a hotel is capital-intensive as the gestation period to get a return is long." Hospitality as an asset class is certainly a long-term play. Here PR Srinivas, Director, Hospitality, Cushman & Wakefield India Pvt Ltd, looks at the macro scenario. He says, "Construction for many hotels seen today, especially the upscale ones, started around 2007-2008 when the market was doing well. But by the time these have been completed, the situation has been tough and demand has not grown to the same level. This has resulted in bad occupancy and hence, the rates are also not optimal now."

Ongoing trends
It takes four to five years to build a hotel and another two to three years to stabilise; then, if you continuously report a loss, it turns into poor return on investment (RoI). Many developers or hoteliers are reworking their projects and opting for conversion, like getting into mixed-use development, or putting existing hotels up for sale. What is driving this trend?

Sharing a designer's point of view, Pronit Nath, Principal Architect, Urban Studio, says, "In many cases, the project is not designed for the right market at the right time. One has to get the right mix, the correct segment and the apt location." Here, Uday K Patil, Director, Uday Structurals & Engineers Pvt Ltd, says, "People have not been investing in the construction, building or infrastructure sector, as a result of which they have not been travelling to visit places within the country and hence rooms have been vacant." According to Rajat Suri, Head of Hospitality, Baani, "If hotels are not doing well unlike other asset classes, we will try and mitigate our risks and focus more on other asset classes in the real-estate sector. Certain things like retail, residences or service apartments and office space are easier to sell in a mixed development and cash is much faster to recover." This trend is evident in the Aerocity project in Delhi, where retail arcades have been made to lease and get a fixed monthly income, which may take longer in a hotel.

Also, a lot of FDI did come to India but the stumbling blocks proved to be the long time taken by approvals and the cost to build the gestation period can be anywhere from five to seven years, and many companies do not prefer waiting that long. Suri points out, "Today, it is cheaper to buy a hotel ready on the block than build it." Patil agrees, saying, "The trend is such that hotels are available for sale; so before constructing, people will first buy those. So I don't think we will see many hotels coming up for the next one-and-a-half to two years." However, Sethi has a different perspective. "When the markets are on the verge of turning for the better, nobody should be exiting any property right now," he insists.

Tracking Tier-II and Tier-III cities
Another shift is the entry of hotel operators into Tier-II and Tier-III cities, including industrial towns and religious and tourist destinations. According to the Indian Hotel Industry Survey by the Federation of Hotel & Restaurant Associations of India, in order to achieve the Twelfth Five-Year Plan target of 1,452 million domestic tourist visits by 2017, the industry needs to add 120,000 rooms in the budget and mid-market category, entailing an estimated capital investment of Rs 50,000 crore. Also, Srinivas sees huge opportunities in Tier-II and Tier-III cities but believes "the market is not ready for branded products". Suri adds, "A lot of Tier-II and Tier-III cities did not have enough supply. Certain Tier-II cities are well supplied but it has to be done in a strategic manner. For instance, one can't open three more businesses in a city that can't even support two. But for cities with a population of over a million, there is definite potential." Patil shares, "People travelling to these cities are basically executives and do not demand luxury hotels but budget hotels with a room rate of Rs 2,000 to Rs 6,000." However, JLL's listing goes beyond just budget hotels. According to its report, hotel operators, including Marriot, Hyatt and Carlson, have taken their brands to cities such as Bhopal, Kochi, Katra and Hampi, which were not on the radar a decade ago. Currently, 68,000 hotel rooms are expected to be operational over the next few years, of which at least 35 per cent will be in Tier-II and Tier-III cities.

Per-key cost
One makes money in a hotel even before it is built, Umathe believes. It is crucial to see what the market will generate into revenue and one's industry should be proportionate to that, only then it will make financial sense. "So the per-key cost of development has no relevance to what is happening in the market," he says.

However, owing to Berggruen Hotels Pvt Ltd's experience, Sethi has some numbers to share. "Our standard three-star hotels costs us about Rs 30-odd lakh to build per room from ground to top. Then, there is the service apartments, which roughly costs the same amount. Our third product is the Keys Resorts, where the per-key cost of development is about Rs 40 lakh to Rs 45 lakh per room." And sharing some numbers across segments as well, Suri reveals, "Budget hotels usually range anywhere from Rs 25-35 lakh a key, excluding land cost, mid-segment from Rs 45-75 lakh and luxury hotels between Rs 75 lakh and Rs 1.2 crore a key."

Purchase decision making
All large hotel chains have development arms that determine the city where the hotel should be built depending on present and past absorption rate. But, ultimately, once the developer is ready to invest in a hotel project, who decides what to buy?

Building contractor Patil responds, "We purchase the materials ourselves but the decision on what to buy and its quality is taken by the architect or developer." However, Suri is clear that contractors and architects have no role to play in the purchase decision but simply execute the vision of the investors. He adds, "A hotel is not about just a building, it is about being able to recover your operating cost as well. That said, it's the investor or developer who makes the decisions, right from purchasing the land to what to build on it."

Sethi believes this differs from project to project and company to company. "In our company, it is a combination of the project and materials departments," he shares. "Both come together and decide. Sometimes, materials are imported while at times local materials are used. For components with a longer shelf life, you tend to go with more reputed companies. Ultimately, tenders are invited and presented to the managing director of the company; based on various parameters, the final call is taken."

Overcoming challenges
For the developer, hotelier or investor, other than the market itself, government policies, getting the project mix right and seeking approvals are further challenges. Also, the cost of land, borrowings and construction is high. Moreover, as this sector involves a long gestation period for investment, knowing what the market can absorb also gets challenging for the investor.

Suri has some solutions. "The industry should do its study well and understand demand-supply. Today, every brand wants distribution. Hence, some partnering between organisations, where not everybody needs a property in every city, might help. This can avoid oversupply." For his part, Patil says, "We have a bank of high-end equipment here that can speed up hotel construction as delay leads to revenue loss for the hotelier. We can do the construction work faster with our formwork technology."

Time to modify
That said, a game-changing factor could be the new government at the Centre, which has the industry upbeat.

Here are some recommendations for the government:

Srinivas: Recognising hospitality as a part of the infrastructure sector across the board, which will allow sourcing funds at different places; promote social acceptance of the industry.
Nath: Making it easier to import items, help make hotels more green and sustainable and make provision for incentives.
Suri: Tax advantage or strategic advantage; cheaper access to preferential land banks with higher FSI; being able to do different asset classes with the same development; access to cheaper capital; access to more trained manpower.
Patil: Develop tourism and pilgrimage centres across the country. While the sector looks forward to the new government's check in, consider the positives: the benefit of incentive FSI, 100-per-cent FDI under automatic route and infrastructure status to hotel projects valued at over Rs 200 crore. The base is set it's time to get going.

Quick Bytes

Hotel operators enter Tier-II and -III cities, including industrial towns and religious and tourist destinations.
Requirement by 2017: 120,000 rooms in budget and mid-market category.
Per key cost of development: Budget hotels-Rs 25-35 lakh; mid-segment- Rs 45-75 lakh; luxury hotels- Rs 75 lakh to Rs 1.2 crore.

While demand has only doubled, supply has quadrupled."
Abhijeet Umathe, National Head, Hospitality and Leisure, Knight Frank

Nobody should be exiting any hospitality property right now."
Sanjay Sethi, Managing Director and CEO, Berggruen Hotels Pvt Ltd

City-wise outlook
Ahmedabad
Four new hotels opened for business in 2013: Tune Hotels (100 keys), Aloft (176 keys), Easy Eastin Citizen (52 keys) and Novotel (184 keys).
Crowne Plaza with 200 keys was expected to start operations in 2013 but is currently on hold.

Outlook
Ahmedabad is likely to see upward movement in demand in 2014, given the upcoming inventory of office stock in the city and being an emerging city along with the development as a twin city, with Gandhinagar in the neighbourhood.

Bengaluru

Total upcoming supply of 6,978 keys by 2017 (27 per cent expected in the budget and midscale segments, 25 per cent in the upscale segment, 17 per cent in upper upscale, and 4 per cent in the luxury segment).
Of total upcoming supply, 38 per cent is expected to become operational during 2014 with brands like Encore (90 keys), Double Tree By Hilton (185 keys), Hilton Residences (250 keys), Renaissance (278 keys), and Conrad (250 keys), etc.

Outlook
Of total room demand, 60 per cent comes from corporate clients and is further expected to see steady growth in time. Additionally, Bengaluru currently has over 7.3 million sq ft of Grade A office space under construction.

Chennai

During 2013, the growth in inventory was only 3 per cent with Westin adding an addition of 215 keys to the inventory.
Of the total upcoming supply by 2017, 51 per cent is in the midscale segment, 29 per cent in the budget segment, 11 per cent in the upper upscale segment and 9 per cent in the upscale segment.
òAbout 20 per cent of this total inventory is expected to be operational in 2014 with brands like Ibis (160 keys), Gateway (159 keys), Formule 1(150 keys), and Holiday Inn (200 keys).

Outlook
The development of Chennai Bengaluru Industrial Corridor is making the city a major upcoming commercial destination. Chennai is currently seeing a slight oversupply particularly owing to major inventory increase over the past two years.

Today, it is cheaper to buy a hotel ready on the block than build it."
Rajat Suri, Head of Hospitality, Baani

About 52,000 new hotel rooms are expected to come on stream in India's top eight cities by 2017.

Building a hotel is capital-intensive as the gestation period to get a return is long."
Anshuman Magazine, Chairman & Managing Director,CBRE South Asia Pvt Ltd

One has to get the right mix, the correct segment and the apt location."
Pronit Nath, Principal Architect, Urban Studio

Hyderabad

During 2013, inventory grew at 6 per cent, owing to the recent opening of Trident Hotel (323 keys) in Madhapur.
Of total upcoming supply by 2017, 46 per cent is in the midscale segment, 23 per cent in the budget segment, 13 per cent in the luxury segment, 12 per cent in the upscale segment and 6 per cent in the upper upscale segment.
About 50 per cent of upcoming supply is expected to open in 2014 with brands such as Formule 1 (174 keys), Mercure (128 keys), The Oberoi (220 keys) and Hyatt Place (148 keys).

Outlook
Of the major micro markets existing in Hyderabad, Gachibowli and Madhapur are seen to be the prime destinations for upcoming commercial and office space ventures in the city, which is likely to augment an increase in room night demand in the future for the micro-markets. Also, if Telengana is created, Hyderabad shall act as a joint capital for Andhra Pradesh and Telengana for up to 10 years.

Kolkata

Of total upcoming supply by 2017, 34 per cent is in the midscale segment, 30 per cent in the luxury segment, 19 per cent in the upper upscale segment, 10 per cent in the upscale segment and 7 per cent in the budget segment.
About 41 per cent of upcoming supply is expected to open in 2014 with brands such as Westin (323 Keys), Novotel (350 Keys), JW Marriott (300 keys), and the Lalit Great Eastern (244 keys).

Outlook
Kolkata has some significant upcoming infrastructure such as the Light Rail Transport System, Mono Rail, Eco-Park, etc. Airport expansion is likely to augment travel within the region, allowing for an increase in room night demand. Major suburban developments in areas such as New Town and Rajarhat are the most predominant, which includes a number of upcoming hotels such as Formule 1, Ibis, Novotel and Westin.

Mumbai

Of total upcoming supply by 2017, 35 per cent is in the midscale segment, 22 per cent in the luxury segment, 17 per cent in the upscale segment, 16 per cent in the budget segment and 10 per cent in the upper upscale segment.
About 17 per cent of upcoming supply is expected to open in 2014, which includes brands such as Lemon Tree (298 keys), JW Marriott (525 keys) and Radisson Blu Plaza Hotel Powai (335 keys).

Outlook
Mumbai has significant upcoming infrastructure that is expected to enhance connectivity within and to the city. This includes the new airport Terminal 2, which opened this year. Additionally, Navi Mumbai is expected to see the development of a new airport, which is expected to augment demand for the micro-market in the long run.

We may not see many hotels coming up for the next one-and-a-half to two years."
Uday K Patil, Director, Uday Structurals & Engineers Pvt Ltd

Social acceptance of the hospitality industry should be promoted."
PR Srinivas, Director, Hospitality, Cushman & Wakefield India Pvt Ltd

NCR

In 2013, NCR had 26,500 keys of which 77 per cent comprised the organised segment.
Close to 15 new hotels opened for business in 2013, adding a total of 2,920 keys to existing room supply.
NCR's hospitality market is substantially covered under seven main regions.
Of total upcoming supply by 2017, 31 per cent belongs to Delhi, 27 per cent to Gurgaon, 22 per cent to Noida, 12 per cent to Greater Noida, 5 per cent to Manesar and 3 per cent to Faridabad.

Outlook
Delhi hotels have recently received approval from Delhi Development Authority for higher FSI as well as a grant to build small dwelling units in hotel complexes that will support debt-funding. Also, the government has included hotel projects over Rs 200 crore in the infra-lending list, which will support high-end hotels in availing low interest funding. Thus, the NCR hotel market is positive in outlook.

Pune

During 2013, the city witnessed an increase by 8 per cent, with the opening of Novotel (251 keys), Formule 1-Hinjewadi (105 keys), Courtyard By Marriott-Chakan (180 keys) and Doubletree by Hilton-Chinchwad (115 keys).
Of total upcoming supply by 2017, 40 per cent is in the midscale segment, 20 per cent in the luxury segment, 18 per cent in the upper upscale segment, 13 per cent in the budget segment and 9 per cent in the upscale segment.
During 2014, almost 24 per cent of the total supply is expected to open, with brands such as Hyatt Place (130 Keys), Lemon Tree Pune City Center (230 keys) and Country Inn and Suites (230 keys).

Outlook
The IT parks situated in Hinjewadi, Talawade and Kharadi have been a constant attraction for global players, driving traffic to the city. Further, there are plans to expand to make a new airport, which indicates growth in footfall numbers in the city. Additionally, Pune witnessed an increase in commercial space absorption. The IT-ITeS sector contributed to nearly 58 per cent of the absorption followed by the BFSI with 17 per cent, a major indicator of growing corporate room night demand in the city.

Source: Cushman & Wakefield, January 2014
To share your views on India's Hospitality sector, write in at feedback@ASAPPmedia.com

Indian hospitality sector, after battling low occupancies and poor room rates in the recent years, seems set for rejuvenation with high hopes from the new government. SHRIYAL SETHUMADHAVAN explores solutions for the industry and suggestions for the policy makers. Unlike real estate, hospitality enjoys industry status, which provides it access to easy and cheap funding. Yet, this sector has taken a hit owing to the global economic downturn. The silver lining: good times appear to be on the way. According to a Cushman & Wakefield report, the hospitality sector is set to see a rise of over 65 per cent in total hotel inventory by 2017 52,000 new hotel rooms are expected to come on stream in India's top eight cities during 2013-2017 (see table on 'Total hotel inventory by 2017'), and projects that have been delayed in the past two years are also expected to get completed. Negative backdrop Despite this positive outlook, right now, there is a massive oversupply. "Supply is a little disproportionate to demand," says Abhijeet Umathe, National Head, Hospitality and Leisure, Knight Frank, adding that while demand has only doubled, supply has quadrupled. Meanwhile Sanjay Sethi, Managing Director and CEO, Berggruen Hotels Pvt Ltd, says, "We are not a consumer-driven business, like retail or corporate-driven businesses. But how the corporate segment IT, consultancy services, automobile industry performs is directly proportional to how we will perform." While Anshuman Magazine, Chairman & Managing Director, CBRE South Asia Pvt Ltd, believes average room revenues (ARRs) have not really gone to the level owing to the oversupply, he highlights the irony in India: "If you look at the population and the size of the country and the number of rooms, on paper we are completely undersupplied. But building a hotel is capital-intensive as the gestation period to get a return is long." Hospitality as an asset class is certainly a long-term play. Here PR Srinivas, Director, Hospitality, Cushman & Wakefield India Pvt Ltd, looks at the macro scenario. He says, "Construction for many hotels seen today, especially the upscale ones, started around 2007-2008 when the market was doing well. But by the time these have been completed, the situation has been tough and demand has not grown to the same level. This has resulted in bad occupancy and hence, the rates are also not optimal now." Ongoing trends It takes four to five years to build a hotel and another two to three years to stabilise; then, if you continuously report a loss, it turns into poor return on investment (RoI). Many developers or hoteliers are reworking their projects and opting for conversion, like getting into mixed-use development, or putting existing hotels up for sale. What is driving this trend? Sharing a designer's point of view, Pronit Nath, Principal Architect, Urban Studio, says, "In many cases, the project is not designed for the right market at the right time. One has to get the right mix, the correct segment and the apt location." Here, Uday K Patil, Director, Uday Structurals & Engineers Pvt Ltd, says, "People have not been investing in the construction, building or infrastructure sector, as a result of which they have not been travelling to visit places within the country and hence rooms have been vacant." According to Rajat Suri, Head of Hospitality, Baani, "If hotels are not doing well unlike other asset classes, we will try and mitigate our risks and focus more on other asset classes in the real-estate sector. Certain things like retail, residences or service apartments and office space are easier to sell in a mixed development and cash is much faster to recover." This trend is evident in the Aerocity project in Delhi, where retail arcades have been made to lease and get a fixed monthly income, which may take longer in a hotel. Also, a lot of FDI did come to India but the stumbling blocks proved to be the long time taken by approvals and the cost to build the gestation period can be anywhere from five to seven years, and many companies do not prefer waiting that long. Suri points out, "Today, it is cheaper to buy a hotel ready on the block than build it." Patil agrees, saying, "The trend is such that hotels are available for sale; so before constructing, people will first buy those. So I don't think we will see many hotels coming up for the next one-and-a-half to two years." However, Sethi has a different perspective. "When the markets are on the verge of turning for the better, nobody should be exiting any property right now," he insists. Tracking Tier-II and Tier-III cities Another shift is the entry of hotel operators into Tier-II and Tier-III cities, including industrial towns and religious and tourist destinations. According to the Indian Hotel Industry Survey by the Federation of Hotel & Restaurant Associations of India, in order to achieve the Twelfth Five-Year Plan target of 1,452 million domestic tourist visits by 2017, the industry needs to add 120,000 rooms in the budget and mid-market category, entailing an estimated capital investment of Rs 50,000 crore. Also, Srinivas sees huge opportunities in Tier-II and Tier-III cities but believes "the market is not ready for branded products". Suri adds, "A lot of Tier-II and Tier-III cities did not have enough supply. Certain Tier-II cities are well supplied but it has to be done in a strategic manner. For instance, one can't open three more businesses in a city that can't even support two. But for cities with a population of over a million, there is definite potential." Patil shares, "People travelling to these cities are basically executives and do not demand luxury hotels but budget hotels with a room rate of Rs 2,000 to Rs 6,000." However, JLL's listing goes beyond just budget hotels. According to its report, hotel operators, including Marriot, Hyatt and Carlson, have taken their brands to cities such as Bhopal, Kochi, Katra and Hampi, which were not on the radar a decade ago. Currently, 68,000 hotel rooms are expected to be operational over the next few years, of which at least 35 per cent will be in Tier-II and Tier-III cities. Per-key cost One makes money in a hotel even before it is built, Umathe believes. It is crucial to see what the market will generate into revenue and one's industry should be proportionate to that, only then it will make financial sense. "So the per-key cost of development has no relevance to what is happening in the market," he says. However, owing to Berggruen Hotels Pvt Ltd's experience, Sethi has some numbers to share. "Our standard three-star hotels costs us about Rs 30-odd lakh to build per room from ground to top. Then, there is the service apartments, which roughly costs the same amount. Our third product is the Keys Resorts, where the per-key cost of development is about Rs 40 lakh to Rs 45 lakh per room." And sharing some numbers across segments as well, Suri reveals, "Budget hotels usually range anywhere from Rs 25-35 lakh a key, excluding land cost, mid-segment from Rs 45-75 lakh and luxury hotels between Rs 75 lakh and Rs 1.2 crore a key." Purchase decision making All large hotel chains have development arms that determine the city where the hotel should be built depending on present and past absorption rate. But, ultimately, once the developer is ready to invest in a hotel project, who decides what to buy? Building contractor Patil responds, "We purchase the materials ourselves but the decision on what to buy and its quality is taken by the architect or developer." However, Suri is clear that contractors and architects have no role to play in the purchase decision but simply execute the vision of the investors. He adds, "A hotel is not about just a building, it is about being able to recover your operating cost as well. That said, it's the investor or developer who makes the decisions, right from purchasing the land to what to build on it." Sethi believes this differs from project to project and company to company. "In our company, it is a combination of the project and materials departments," he shares. "Both come together and decide. Sometimes, materials are imported while at times local materials are used. For components with a longer shelf life, you tend to go with more reputed companies. Ultimately, tenders are invited and presented to the managing director of the company; based on various parameters, the final call is taken." Overcoming challenges For the developer, hotelier or investor, other than the market itself, government policies, getting the project mix right and seeking approvals are further challenges. Also, the cost of land, borrowings and construction is high. Moreover, as this sector involves a long gestation period for investment, knowing what the market can absorb also gets challenging for the investor. Suri has some solutions. "The industry should do its study well and understand demand-supply. Today, every brand wants distribution. Hence, some partnering between organisations, where not everybody needs a property in every city, might help. This can avoid oversupply." For his part, Patil says, "We have a bank of high-end equipment here that can speed up hotel construction as delay leads to revenue loss for the hotelier. We can do the construction work faster with our formwork technology." Time to modify That said, a game-changing factor could be the new government at the Centre, which has the industry upbeat. Here are some recommendations for the government: Srinivas: Recognising hospitality as a part of the infrastructure sector across the board, which will allow sourcing funds at different places; promote social acceptance of the industry. Nath: Making it easier to import items, help make hotels more green and sustainable and make provision for incentives. Suri: Tax advantage or strategic advantage; cheaper access to preferential land banks with higher FSI; being able to do different asset classes with the same development; access to cheaper capital; access to more trained manpower. Patil: Develop tourism and pilgrimage centres across the country. While the sector looks forward to the new government's check in, consider the positives: the benefit of incentive FSI, 100-per-cent FDI under automatic route and infrastructure status to hotel projects valued at over Rs 200 crore. The base is set it's time to get going. Quick Bytes Hotel operators enter Tier-II and -III cities, including industrial towns and religious and tourist destinations. Requirement by 2017: 120,000 rooms in budget and mid-market category. Per key cost of development: Budget hotels-Rs 25-35 lakh; mid-segment- Rs 45-75 lakh; luxury hotels- Rs 75 lakh to Rs 1.2 crore. While demand has only doubled, supply has quadrupled." Abhijeet Umathe, National Head, Hospitality and Leisure, Knight Frank Nobody should be exiting any hospitality property right now." Sanjay Sethi, Managing Director and CEO, Berggruen Hotels Pvt Ltd City-wise outlook Ahmedabad Four new hotels opened for business in 2013: Tune Hotels (100 keys), Aloft (176 keys), Easy Eastin Citizen (52 keys) and Novotel (184 keys). Crowne Plaza with 200 keys was expected to start operations in 2013 but is currently on hold. Outlook Ahmedabad is likely to see upward movement in demand in 2014, given the upcoming inventory of office stock in the city and being an emerging city along with the development as a twin city, with Gandhinagar in the neighbourhood. Bengaluru Total upcoming supply of 6,978 keys by 2017 (27 per cent expected in the budget and midscale segments, 25 per cent in the upscale segment, 17 per cent in upper upscale, and 4 per cent in the luxury segment). Of total upcoming supply, 38 per cent is expected to become operational during 2014 with brands like Encore (90 keys), Double Tree By Hilton (185 keys), Hilton Residences (250 keys), Renaissance (278 keys), and Conrad (250 keys), etc. Outlook Of total room demand, 60 per cent comes from corporate clients and is further expected to see steady growth in time. Additionally, Bengaluru currently has over 7.3 million sq ft of Grade A office space under construction. Chennai During 2013, the growth in inventory was only 3 per cent with Westin adding an addition of 215 keys to the inventory. Of the total upcoming supply by 2017, 51 per cent is in the midscale segment, 29 per cent in the budget segment, 11 per cent in the upper upscale segment and 9 per cent in the upscale segment. òAbout 20 per cent of this total inventory is expected to be operational in 2014 with brands like Ibis (160 keys), Gateway (159 keys), Formule 1(150 keys), and Holiday Inn (200 keys). Outlook The development of Chennai Bengaluru Industrial Corridor is making the city a major upcoming commercial destination. Chennai is currently seeing a slight oversupply particularly owing to major inventory increase over the past two years. Today, it is cheaper to buy a hotel ready on the block than build it." Rajat Suri, Head of Hospitality, Baani About 52,000 new hotel rooms are expected to come on stream in India's top eight cities by 2017. Building a hotel is capital-intensive as the gestation period to get a return is long." Anshuman Magazine, Chairman & Managing Director,CBRE South Asia Pvt Ltd One has to get the right mix, the correct segment and the apt location." Pronit Nath, Principal Architect, Urban Studio Hyderabad During 2013, inventory grew at 6 per cent, owing to the recent opening of Trident Hotel (323 keys) in Madhapur. Of total upcoming supply by 2017, 46 per cent is in the midscale segment, 23 per cent in the budget segment, 13 per cent in the luxury segment, 12 per cent in the upscale segment and 6 per cent in the upper upscale segment. About 50 per cent of upcoming supply is expected to open in 2014 with brands such as Formule 1 (174 keys), Mercure (128 keys), The Oberoi (220 keys) and Hyatt Place (148 keys). Outlook Of the major micro markets existing in Hyderabad, Gachibowli and Madhapur are seen to be the prime destinations for upcoming commercial and office space ventures in the city, which is likely to augment an increase in room night demand in the future for the micro-markets. Also, if Telengana is created, Hyderabad shall act as a joint capital for Andhra Pradesh and Telengana for up to 10 years. Kolkata Of total upcoming supply by 2017, 34 per cent is in the midscale segment, 30 per cent in the luxury segment, 19 per cent in the upper upscale segment, 10 per cent in the upscale segment and 7 per cent in the budget segment. About 41 per cent of upcoming supply is expected to open in 2014 with brands such as Westin (323 Keys), Novotel (350 Keys), JW Marriott (300 keys), and the Lalit Great Eastern (244 keys). Outlook Kolkata has some significant upcoming infrastructure such as the Light Rail Transport System, Mono Rail, Eco-Park, etc. Airport expansion is likely to augment travel within the region, allowing for an increase in room night demand. Major suburban developments in areas such as New Town and Rajarhat are the most predominant, which includes a number of upcoming hotels such as Formule 1, Ibis, Novotel and Westin. Mumbai Of total upcoming supply by 2017, 35 per cent is in the midscale segment, 22 per cent in the luxury segment, 17 per cent in the upscale segment, 16 per cent in the budget segment and 10 per cent in the upper upscale segment. About 17 per cent of upcoming supply is expected to open in 2014, which includes brands such as Lemon Tree (298 keys), JW Marriott (525 keys) and Radisson Blu Plaza Hotel Powai (335 keys). Outlook Mumbai has significant upcoming infrastructure that is expected to enhance connectivity within and to the city. This includes the new airport Terminal 2, which opened this year. Additionally, Navi Mumbai is expected to see the development of a new airport, which is expected to augment demand for the micro-market in the long run. We may not see many hotels coming up for the next one-and-a-half to two years." Uday K Patil, Director, Uday Structurals & Engineers Pvt Ltd Social acceptance of the hospitality industry should be promoted." PR Srinivas, Director, Hospitality, Cushman & Wakefield India Pvt Ltd NCR In 2013, NCR had 26,500 keys of which 77 per cent comprised the organised segment. Close to 15 new hotels opened for business in 2013, adding a total of 2,920 keys to existing room supply. NCR's hospitality market is substantially covered under seven main regions. Of total upcoming supply by 2017, 31 per cent belongs to Delhi, 27 per cent to Gurgaon, 22 per cent to Noida, 12 per cent to Greater Noida, 5 per cent to Manesar and 3 per cent to Faridabad. Outlook Delhi hotels have recently received approval from Delhi Development Authority for higher FSI as well as a grant to build small dwelling units in hotel complexes that will support debt-funding. Also, the government has included hotel projects over Rs 200 crore in the infra-lending list, which will support high-end hotels in availing low interest funding. Thus, the NCR hotel market is positive in outlook. Pune During 2013, the city witnessed an increase by 8 per cent, with the opening of Novotel (251 keys), Formule 1-Hinjewadi (105 keys), Courtyard By Marriott-Chakan (180 keys) and Doubletree by Hilton-Chinchwad (115 keys). Of total upcoming supply by 2017, 40 per cent is in the midscale segment, 20 per cent in the luxury segment, 18 per cent in the upper upscale segment, 13 per cent in the budget segment and 9 per cent in the upscale segment. During 2014, almost 24 per cent of the total supply is expected to open, with brands such as Hyatt Place (130 Keys), Lemon Tree Pune City Center (230 keys) and Country Inn and Suites (230 keys). Outlook The IT parks situated in Hinjewadi, Talawade and Kharadi have been a constant attraction for global players, driving traffic to the city. Further, there are plans to expand to make a new airport, which indicates growth in footfall numbers in the city. Additionally, Pune witnessed an increase in commercial space absorption. The IT-ITeS sector contributed to nearly 58 per cent of the absorption followed by the BFSI with 17 per cent, a major indicator of growing corporate room night demand in the city. Source: Cushman & Wakefield, January 2014 To share your views on India's Hospitality sector, write in at feedback@ASAPPmedia.com