With the current slowdown, occupancy levels and demand in Hyderabad today are affected, however, the city is projected to witness an increase in room-night demand by 2013.
Hyderabad has been growing at 12% over the past five years, which has resulted in the development of the city’s peripheral locations.
There are several Fortune 500 Corporations present in Hyderabad, majority of them belonging to the IT/ ITeS industry; Microsoft, for example, has the largest R&D campus outside the USA, here.
The hotels that came up earlier were all close to the business districts of Somajiguda, Ameerpet, Nampally, Banjara Hills, Kukatpally, and Charminar area.
The Indian Hotels Company Ltd (IHCL) has three prime properties in Banjara Hills namely Taj Banjara, Taj Krishna, and Taj Deccan, with a room inventory of over 500 rooms.
The ITC Kakatiya, The Green Park, and Hampshire Plaza are other prominent hotels within the city, while Marriott Hyderabad Hotel & Convention Centre (the erstwhile Viceroy), with an inventory of 297 rooms, enjoys a good location overlooking Husain Sagar Lake.
The emergence of the IT and biotechnology sector in the city saw many new brands entering the market, such as Hyderabad Novotel, Hotel Ista & Ella Suites to name a few.
The Hyderabad hotel market is bottom heavy, with midscale and budget hotels constituting over 50% of the hotel rooms. The dynamics of the sector are expected to change over the next couple of years with more branded products entering the market, mostly in the upscale category.
About 75% of the demand here is corporate in nature, with around 10% is the extended stay segment. The prominent demand-generating companies in Hyderabad such as Wipro, Microsoft, and Deloitte, contributed between 1,500 to 2,000 room nights per month on an average during the year 2008.
However, towards the last two quarters of 2008, the numbers declined. Hyderabad International Convention Centre (HICC) has induced about 10% demand in the Meetings & Conference segment and the city is increasingly becoming the preferred convention centre in India and Asia.
Events like the Air Show (biennial), which debuted last year, Indian Cricket League, and Indian Premier League (annual), have also created a seasonal demand in the city.
The Hyderabad hotel market comprises of approximately 5,000 quality hotel rooms. The market achieved approximately 73.5% occupancy in the year 2007- 2008. The global economic slow-down and the Mumbai blasts impacted this market too, with occupancies dropping to 69% in financial year 2008-2009 and marginal recovery in financial year 2009-2010 to 70.5%.
The drop in occupancy rate reflected in the ARR, which registered a decrease to Rs4,406 in the financial year 2008- 2009. The performance for the Hyderabad hotel market is likely to recover gradually and result in an increase in ARR to Rs4,635 in the financial year 2009- 2010.
Historically, the citywide occupancy was approximately 65% to 68% which increased to about 75% with the emergence of IT/ ITeS and biotechnology. The city is projected to witness about 13% increase in room night demand by 2013.
Many brands like The Leela, The Trident, The Oberoi, and Fairmont have announced their projects in the city. Westin is expected to be operational by end of year 2009 with an inventory of 400 rooms, while the Taj Group is developing two more properties – Taj Begumpet and Taj Falaknuma Palace.
Hyderabad’s hotel market has traditionally had a small supply base of quality hotel rooms. Sharp rises in occupancy and ARR achieved during the peak years have faced correction as a result of lower demand levels and increasing supply.
Approximately 10,000 rooms are expected in the city by the year 2014, over a base of roughly 2000 in the year 2009. The proposed supply is top heavy, which implies an anticipated competitive market in the luxury and first class hotel segments, exerting downward pressure on rates.
