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Cushman and Wakefield - CII releases report at the 4th International CII Hospitality Fair2012
Report on “Indian Hospitality Story 2012 & Beyond”
50,000 HOTEL ROOMS IN TOP SIX CITIES IN THE NEXT 5 YEARS:
C&W – CII REPORT


NCR will witness highest number of rooms (17, 550), followed by Mumbai (10, 200) and Bangalore
(9, 400) over next 5-6 years
Decline of 4% in the Average Occupancy Rate and 5% in the Average Room Rate over 2011
Cushman & Wakefield (C&W), India’s leading real estate consultancy firm today jointly launched the research
report with Confederation of Indian Industries (CII) titled “Indian Hospitality Story 2012 & Beyond” at
the 4th International CII Hospitality Fair- 2012 which was held today in New Delhi. The report was released
at the first day of the 3 – day exhibition by Honourable Minister of Tourism, Mr Subodh Kant Sahai.
In this report Cushman & Wakefield evaluates the hospitality sector dynamics of top six cities of India Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Mumbai and provides an overview on the performance,
growth and outlook of the Indian Hospitality industry.
According to the report, the top six cities of India are expected to see a total of 50,000 new hotel rooms
across categories in the next 5- 6 years. This is in response to the steady growth the hospitality sector has
recorded over the last few years. 2012 alone is expected to see 14,800 fresh keys by the end of the year. Out
of the total expected supply for 2012, 2000 new hotel rooms have already entered the market.
Akshay Kulkarni, Regional Director – Hospitality, South and South East Asia, Cushman &
Wakefield, said “India’s hospitality sector has been witnessing interest from a variety of segments ranging from - MICE,
Wellness Tourism, Spiritual & Pilgrimage Tourism, apart from the traditional business or leisure travel. The demand has been
strong from both foreign as well as domestic tourists. Given the rather diverse nature of demand, the hospitality industry is also
looking at creating adequate products to service the varied tourist requirements. With the support and initiatives by the
governments at various levels, the hospitality sector is moving towards comprehensive growth”
NCR, with a total room supply of 17,500 rooms, is expected to see the highest fresh hotel room supply in
the next 5 years. Mumbai (10, 200) and Bangalore (9, 400) will also see significant addition to the existing
inventories in the city. The addition of new inventory will be concentrated in the potential growth areas –
especially around airports, commercial growth corridors, industrial corridors and SEZs. These micro markets
emerged as a result of business centers that were created in these cities due to growth in IT/ITeS , trade and
commerce.
Hotel Supply ( No. of rooms)
City Wise
H1-2012
H2-2012
Upcoming
Bengaluru
400
3,800
9,400
Chennai
160
2,200
5,150
Hyderabad
430
160
3,720
Kolkata
0
150
4,500
Mumbai
300
1,540
10,200
NCR
830
5,000
17,550
Total
2,120
12,850
50,520
Source: Cushman & Wakefield research
The top six cites witnessed an Average Occupancy of 58% with an Average Room Rate (ARR) of INR 5,400
in HI 2012. The current averages record a marginal decline of 4% in AOR and 5% in ARR over the average
of 2011 (full year) performance. Chennai recorded the highest Average Occupancy Rates (AOR) of 64% for
H1 2012, followed by Mumbai (61%) and Kolkata (60%). All the cities witnessed only a marginal drop in
AOR when compared to the previous year 2011. Mumbai and Kolkata saw the maximum dip in AOR.
A decline in AOR in popular destinations was due a number of factors but primarily due to addition of
supply in major cities in H1 2012. On the other hand, a moderate slowdown in global economies led many
corporations to curtail travel, while individual travelers have also been cautious due to fiscal uncertainties.
Some other factors that have obliquely contributed to lower AOR are the advancements in technologies
which make real time correspondence faster, easier and more cost effective and increase connectivity that
ensure lesser hours of stay per visit. A corresponding decline in ARR was noticed as hotel’s tried to ensure
occupancy even at a moderately lower cost. Healthy competition in many of the cities is leading hotels to
create monetarily attractive packages for potential visitors.
In H1, 2012 Mumbai, recorded the highest ARR of INR 6,400, followed by NCR INR 6,280 and Bengaluru
INR 4,915 . While Chennai and Hyderabad witnessed marginal increase in ARR, all other cities saw the rates
as wither stable or softening over 2011.
City Wise
Average Occupancy Rate
2011
H1-2012
Bengaluru
59%
57%
Chennai
67%
64%
Hyderabad
54%
53%
Kolkata
66%
60%
Mumbai
67%
61%
NCR
63%
58%
Average/Total
62%
58%
Source: Cushman & Wakefield research
City Wise
Average Room Rate
2011
H1-2012
Bengaluru
5,740
4,915
Chennai
4,700
4,900
Hyderabad
3,790
3,830
Kolkata
4,900
4,770
Mumbai
6,395
6,400
NCR
6,555
6,280
Average/Total
5,723
5,444
Source: Cushman & Wakefield research
Akshay added, “Occupancy rates may see an upward trend in the second half of 2012 keeping ARRs steady. However, since
there is a substantial supply that are expected to enter the market over the new few years, the pressure on occupancy rate and
ARRs, will continue.The phasing of the new inventory and gradual growth in the demand for hotels will help keep the rates at
modest levels across the country. However going forward we expect ARRs to improve in the next 12- 18 months on account of
stability in economy and expected growth in tourism in India. Also with more and more international brands operating in the
country, the market will move towards being more organized and standardization of process including cost per room night.”
CITY TRENDS
Bangalore
Bengaluru has a total inventory of 16,000 keys as of H1 2012,with organized segment comprising 68% of the
total inventory. this organized sector, ,The city recorded a marginal decline in occupancy rate to 57%, over
2011 while average room revenues declined by 15% during the period as a few hotels that did become
operational were primarily in the budget and midscale segments. AOR declined due to an increase in the total
number of rooms in the city, while demand remained steady, the proliferation of mid scale hotels was largely
responsible for a decline in the ARRs for the city in the first half of 2012.
Going forward, the city has a pipeline of supply of 9400 rooms over the next 5-6 years. Most of the hotels
will be developed in the luxury, midscale and budget categories. As Bengaluru is primarily an IT/ITeS center
for business travelers and a gateway to southern India for leisure travelers, this trend is substantiated.
Akshay Kulkarni, Regional Director – Hospitality, South and South East Asia, Cushman and Wakefield, The second half of
2012, will see moderate increase in ARRs with the beginning of festival seasons and robust passenger arrivals as observed for the
previous years. MICE is one of the strongest demand segment in Bengaluru, given the penetration of IT/ITeS in the city.
Chennai
Chennai recorded the highest occupancy levels amongst the top six cities at 64%. ARR in H1 2012 was
recorded INR 4,900 recording an increase of approximately 4% over 2011. Being a manufacturing and
industrial center, hotels in Chennai cater to many long stay guests. MICE is also a significant demand segment
in the city as various automotive and pharmaceutical conferences are organized in the city. This is evident in
the stable occupancy rates and room revenues.
The total inventory for the city is 6,187 hotel rooms in H1 2012 of which 92% belongs to the organized
sector. The cities inventory had grown by almost 32% since 2008 till the half year of 2012. The impact of the
economic downturn had delayed a few hotel projects during the last year with only 160 rooms delivered in
H1 2012. However a number of projects have been revived with over 5000 room planned over the next 5-6
years.
The city is expected to see an increase of nearly 36% in luxury segment, followed by 20% in the midscale
segment, 13% in the budget segment, 7% in the upper upscale, and 6% in upscale segment. Also it is
expected to see a more competitive environment in the luxury segment with the introduction of a number of
significant luxury properties.
Akshay Kulkarni, Regional Director – Hospitality, South and South East Asia, Cushman and Wakefield, “Given the
demand segments, the average business traveler to the city is price sensitive. Many hotels that have been and are currently being
developed are in the budget and midscale segments. However, Guindy and Marine Drive are the micro markets with an array of
luxury hotels- existing and upcoming.. The hotels around the airport provide a good mix across all categories.”
Hyderabad
Hyderabad has been a sluggish market for hotel performance as it has been gripped by some internal
disturbances that keep arising in the region. The occupancy levels experienced by hotels have been hovering
around 53% in the first half of 2012. The trend is likely to continue till the government stimulates a positive
sentiment around for business and leisure visitors.
Approximately 3,700 rooms are expected in the market in the next 5-6 years and of the total expected supply
6% will be for luxury, 25% in Upper Upscale, 16% in upscale, 33% in midscale and 20% in the budget
segment.
.
Kolkata
Kolkata has a total hotel inventory of 3,900 rooms of which 72% is in the organised sector. The city has not
seen many new hotel developments in the recent past. The occupancy level of the city has declined from 66%
in 2011 to 60% in H1 2012.ARR however remained unaffected. This may be accorded to the fact that
Kolkata now has better connectivity from many other locations of the country. The number of flights has
increased over the past year enabling the business travelers to return the same day.
Kolkata is expected to see a total of 4,500 new keys in the next 5-6 years which would nearly double the
present hotel room inventory. Out of the current upcoming supply, it is expected that Kolkata will experience
an increase of 33% in the upscale category, followed by 29% in the luxury category, 22% in midscale, 13% in
upper upscale and 3% in the budget segment.
Akshay Kulkarni, Regional Director – Hospitality, South and South East Asia, Cushman and Wakefield, “The
restraint in hotel development activity is likely to change in the city and the projects which have been delayed
due to various reasons will also be revived.”
Mumbai
Mumbai has a total inventory of 18, 500 rooms as of H1 2012, with organized segment comprising 76% of
the total inventory.
With AOR of 61%, Mumbai recorded a decline of 6% in occupancy rate in H1 2012. ARR however, has
remained stable. Mumbai being a perennial market for the hospitality sector, the market has been witnessing
steady demand from both business as well as leisure travellers. However, due to addition of a few hotel
rooms in the beginning of the year, AORs have declined.
A total of 10,200 keys are expected in the next 4 -5 years of which majority supply will be in the upscale
segment, followed by midscale and luxury hotels.
Akshay Kulkarni, Regional Director – Hospitality, South and South East Asia, Cushman and Wakefield, “The
last quarter of the year is the most productive quarter for Mumbai and recovers for the relatively slower months during Q2 and
Q3. Also the city is expected to witness a pipeline of 10,200 keys in the organized segment in the next 4- 5 years and thus the
pipeline indicates an equilibrium that will be achieved with hotels operating across all categories in the various micro markets”
NCR
The city witnessed a supply of approximately 800 rooms in H12012 while 5000 rooms expected in H2 2012.
There has been a slowdown of 3% in AOR and 4% in ARR in H1 2012 over 2011. We expect this to
continue for a short to midterm period due to substantial supply that is expected in the city. Despite this
downward trends, the inherent demand of the city remains as its a significant business center with the
international
airport,
which
records
the
highest
number
of
arrivals
across
the
country.
NCR's hospitality market is substantially covered under seven main regions and in H1 2012, hotels in Noida
have highest occupancy levels (65%), followed by Delhi (64%) and Gurgaon (61%). However, average room
rates are the highest in the Delhi, followed by Gurgaon. Further it is expected that 25% of the total inventory
will come from the midscale segment, followed by luxury (20%), upscale (18%), upper upscale (16%) and
budget (10%).
Akshay Kulkarni, said “The city will see the maximum influx of inventory over the next 5-6 years, with 17,500 keys in the
pipeline in the organized segment. Also the hospitality district near the international airport is perceived to be a game changer and
the first of its kind development in the country.”
About Cushman & Wakefield
Cushman & Wakefield is the world’s largest privately-held commercial real estate services firm. The company advises and represents
clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets,
as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917 it
has 243 offices in 60 countries and more than 14,000 employees. It offers a complete range of services for all property types, including
leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services,
property management, facilities management, project management, consulting and appraisal. The firm has more than $4 billion in
assets under management. A recognized leader in local and global real estate research, the firm publishes its market information and
studies online at www.cushmanwakefield.com/knowledge.