Study Predicts Skewed Growth of Hotel Industry
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Posted: Monday, 20 December 2010 16:10
Study Predicts Skewed Growth of Hotel Industry

Dec 17: The research conducted by a leading independent global property consultancy recently indicates that the demand for hotel rooms per day in India will grow at a CAGR of 10.3% during 2010- 2013 but the supply will grow at an annual growth rate of 15% implying more supply than demand and pressure on the occupancy rates, except Goa and Mumbai which together with Delhi will garner 60% of revenues.

Knight Frank India Pvt Ltd announced on Wednesday the release of their in-depth research study on India’s Hotel Market. The study was made in ten key cities in the hospitality industry namely Delhi & NCR, Mumbai, Bangalore, Goa, Pune, Jaipur, Hyderabad, Chennai, Kolkata and Ahmadabad.

It focused on the performance of the existing hotels in terms of ARRs (average room revenues), occupancy rates and other operational characteristics and analyzed the present market conditions in the hotel industry.

The study indicated that the hotel room market in India is expected to grow about 60% from the current Rs.74 Billion to Rs.119 Billion by 2013. India's financial capital Mumbai is expected to have the largest share of the market at Rs. 42 Billion rupees, followed by the National Capital Region, which includes New Delhi and adjoining areas, at Rs. 28 Billion rupees.

These two markets are expected to corner almost 60% of the total hotel market. It might not be inaccurate to assume that these two cities will play even more important role in the wine distribution and consumption, especially for the imported wines as most hotels here keep a miniscule proportion of Indian wines despite the segment growing faster since several expats and budget consumers prefer more affordable Indian wines. Better quality and aggressive marketing will also play a key role in the push for increase in their share.

To understand the dynamics of hospitality industry, Knight Frank divided the industry in three broad segments -Upscale, Midscale and Economy. A sample of 250 hotels across the ten cities surveyed was analyzed. Dr. Samantak Das, National Head of Research, Knight Frank India says, “Our research indicate that a total of 24,211, 8,709 and 3,057 (about 36,000) additional rooms respectively are expected to become operational in India by 2013. The huge influx of incremental rooms in India will exert downward pressure on the occupancy level and ARRs of hotels for most of the cities.’

He estimated that the occupancy level across all the cities except Mumbai and Goa will witness a falling trend from 2010 to 2013. Strong growth in demand, higher occupancy level, increasing ARRs and low incremental supply in these cities will mean that they will outperform other cities.

Occupancy levels of upscale hotels in Mumbai are expected to improve to 84 % in 2013 from an estimated 68 % this year. ARRs in this category are expected to rise from the present Rs. 9,242 to Rs.12,325  according to the report .

In contrast, occupancy levels in upscale properties in the Delhi NCR region may drop to 60% in 2013 from 65 per cent now, while the room rates may improve marginally from the current Rs. 7,356 to Rs. 8,091

India currently is estimated to have about 100,000 rooms across the above three categories.

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