To meet the surging demand in the hospitality sector, the hotel room inventory in Chennai is graduating from a nascent stage with considerable hotel development activity planned.
Chennai, formerly known as Madras, is the capital city of Tamil Nadu. Located on the Coromandel Coast of Bay of Bengal, Chennai the fourth most populous metropolitan area and the fifth most populous city in India.
Fondly known as the Detroit of India, the city is also an automobile manufacturing hub for the south. Other than the automotive industry, Chennai’s economy is largely driven by the IT/ITES and BFSI sectors and the port.
Chennai has the distinct advantage of having a good share of literate population and availability of skilled manpower at reasonable pricing which has, over time, attracted many multinational companies to set up their operations here.
With growth of IT/ITES and BFSI sectors, the city has experienced considerable growth international and domestic airport passenger movements.
The city has the benefit of good road infrastructure, is well connected to smaller cities and villages and is a major corridor to south India thereby facilitating considerable visitation to the city and as a result, demands for commercial accommodation.
Availability of land at relatively lower rates compared to other metros, lower cost of operations and favourable government initiatives have facilitated rapid growth in the last two-three years.
Several international companies have large scale production units here including Nokia, BMW, and Saint Gobain to name a few.
The Chennai office market has picked up pace with increased enquiries for office space specially in the CBD and suburban regions – which is likely to transpire to driving demand for commercial accommodation in the short to medium term.
The last two quarters of 2010 have seen an increase in the absorption especially in the suburban micro markets; the total supply as of 3Q 2010 stands at 3.97 million square feet and the absorption at 3.25 million square feet.
On account of increased absorption, the vacancy for the overall city has slipped to 20% from the 22% in 3Q 2009. Although the peripheral region has continued to witness higher vacancy due to high supply. A supply of 6.81 million square feet is projected for 2010.
It is expected that the CBD, off CBD and certain suburban markets might witness increase in demand in the medium term.
Chennai hotel market performance The hotel inventory in the city in the financial year 2008 was approximately 3,800 keys (including branded and unbranded stock), which increased to approximately 4,200 keys in the financial year 2009, showing an increase of 11% and a further 400 rooms in the financial year 2010, registering a growth of 21% over 2008 levels.
To meet the surging demand in the hospitality sector, the hotel room inventory in Chennai is graduating from a nascent stage with considerable hotel development activity planned and ongoing.
Approximately 5,000 to 6,000 new rooms are anticipated to enter the Chennai hotel market over the next five years. While not all these rooms are under active development, it is likely that a considerable proportion of the supply will translate into quality accommodation product.
Operators likely to enter the market include Hilton, Marriott, Accor, ITC (with a new property with a considerable room inventory), InterContinental, Sarovar, Leela and Krism.
The following chart illustrates the composition of anticipated supply in the Chennai hotel market.
The city is a key business hub for south India and demand here has historically been driven by the Banking, Financial Services and Insurance (BFSI), IT/ ITeS, the automobile manufacturing industry and leisure.
Nearly 75% to 80% of the city’s demand base is of corporate/ business origin, with the remaining being Meetings, Incentives, Conventions and Exhibitions (MICE), Leisure as well as Airline driven.
The Chennai hotel market, similar to other markets in India, experienced considerable growth in ARR and occupancy levels over the three years up to 2008.
While the economic slump resulted in demand depletion across all market segments and hotel categories, the overall performance of the city for the fiscal year 2010 is not likely to be detrimental to hotel performance.
The competitive market occupancy rate (for organised and unorganised hotel rooms) declined from 69% in financial year 2008 to 65% in 2009 and marginally increased to 66% in the year 2010.
While the occupancy rate experienced minimal growth between 2009 and 2010, the ARR has experienced improvements, highlighting the occupancy and pricing strategies undertaken by hotels to maintain profitability. The ARR grew from approximately INR4,300 in 2008 to approximately INR4,800 in 2008 and a further growth to approximately INR5,200 in 2010.
Outlook Despite the economic slump, the Chennai hotel market appears to be showing signs of positive growth in relation to hotel performance and hotel development activity. A number of developers are currently exploring new hotel development options in the city.
Chennai’s strong demand base is driven by the BFSI, port, automobile manufacturing and IT/ITeS sectors. A sizeable proportion of room night demand is likely to be driven by non-local manpower involved in projects (architects, designers, project management teams, quantity surveyors, etc) who essentially stay over relatively longer periods of time.
The outlook for the city’s hotel market is neutral — while demand is likely to experience growth following the economic slump, although at a lower pace, supply growth is likely to outpace demand in the short term. We anticipate some correction in the ARR, particularly from 2012 to 2015 when majority of the rooms are likely to enter the market.
The long-term outlook for the city is positive with the anticipated quality supply likely to enhance Chennai’s profile on the national and international market.
Chennai: Poised for rapid growth
(NULL)
To meet the surging demand in the hospitality sector, the hotel room inventory in Chennai is graduating from a nascent stage with considerable hotel development activity planned.
Chennai, formerly known as Madras, is the capital city of Tamil Nadu. Located on the Coromandel Coast of Bay of Bengal, Chennai the fourth most populous metropolitan area and the fifth most populous city in India.
Fondly known as the Detroit of India, the city is also an automobile manufacturing hub for the south. Other than the automotive industry, Chennai’s economy is largely driven by the IT/ITES and BFSI sectors and the port.
Chennai has the distinct advantage of having a good share of literate population and availability of skilled manpower at reasonable pricing which has, over time, attracted many multinational companies to set up their operations here.
With growth of IT/ITES and BFSI sectors, the city has experienced considerable growth international and domestic airport passenger movements.
The city has the benefit of good road infrastructure, is well connected to smaller cities and villages and is a major corridor to south India thereby facilitating considerable visitation to the city and as a result, demands for commercial accommodation.
Availability of land at relatively lower rates compared to other metros, lower cost of operations and favourable government initiatives have facilitated rapid growth in the last two-three years.
Several international companies have large scale production units here including Nokia, BMW, and Saint Gobain to name a few.
The Chennai office market has picked up pace with increased enquiries for office space specially in the CBD and suburban regions – which is likely to transpire to driving demand for commercial accommodation in the short to medium term.
The last two quarters of 2010 have seen an increase in the absorption especially in the suburban micro markets; the total supply as of 3Q 2010 stands at 3.97 million square feet and the absorption at 3.25 million square feet.
On account of increased absorption, the vacancy for the overall city has slipped to 20% from the 22% in 3Q 2009. Although the peripheral region has continued to witness higher vacancy due to high supply. A supply of 6.81 million square feet is projected for 2010.
It is expected that the CBD, off CBD and certain suburban markets might witness increase in demand in the medium term.
Chennai hotel market performance
The hotel inventory in the city in the financial year 2008 was approximately 3,800 keys (including branded and unbranded stock), which increased to approximately 4,200 keys in the financial year 2009, showing an increase of 11% and a further 400 rooms in the financial year 2010, registering a growth of 21% over 2008 levels.
To meet the surging demand in the hospitality sector, the hotel room inventory in Chennai is graduating from a nascent stage with considerable hotel development activity planned and ongoing.
Approximately 5,000 to 6,000 new rooms are anticipated to enter the Chennai hotel market over the next five years. While not all these rooms are under active development, it is likely that a considerable proportion of the supply will translate into quality accommodation product.
Operators likely to enter the market include Hilton, Marriott, Accor, ITC (with a new property with a considerable room inventory), InterContinental, Sarovar, Leela and Krism.
The following chart illustrates the composition of anticipated supply in the Chennai hotel market.
The city is a key business hub for south India and demand here has historically been driven by the Banking, Financial Services and Insurance (BFSI), IT/ ITeS, the automobile manufacturing industry and leisure.
Nearly 75% to 80% of the city’s demand base is of corporate/ business origin, with the remaining being Meetings, Incentives, Conventions and Exhibitions (MICE), Leisure as well as Airline driven.
The Chennai hotel market, similar to other markets in India, experienced considerable growth in ARR and occupancy levels over the three years up to 2008.
While the economic slump resulted in demand depletion across all market segments and hotel categories, the overall performance of the city for the fiscal year 2010 is not likely to be detrimental to hotel performance.
The competitive market occupancy rate (for organised and unorganised hotel rooms) declined from 69% in financial year 2008 to 65% in 2009 and marginally increased to 66% in the year 2010.
While the occupancy rate experienced minimal growth between 2009 and 2010, the ARR has experienced improvements, highlighting the occupancy and pricing strategies undertaken by hotels to maintain profitability. The ARR grew from approximately INR4,300 in 2008 to approximately INR4,800 in 2008 and a further growth to approximately INR5,200 in 2010.
Outlook
Despite the economic slump, the Chennai hotel market appears to be showing signs of positive growth in relation to hotel performance and hotel development activity. A number of developers are currently exploring new hotel development options in the city.
Chennai’s strong demand base is driven by the BFSI, port, automobile manufacturing and IT/ITeS sectors. A sizeable proportion of room night demand is likely to be driven by non-local manpower involved in projects (architects, designers, project management teams, quantity surveyors, etc) who essentially stay over relatively longer periods of time.
The outlook for the city’s hotel market is neutral — while demand is likely to experience growth following the economic slump, although at a lower pace, supply growth is likely to outpace demand in the short term. We anticipate some correction in the ARR, particularly from 2012 to 2015 when majority of the rooms are likely to enter the market.
The long-term outlook for the city is positive with the anticipated quality supply likely to enhance Chennai’s profile on the national and international market.
Zee Zest Unlimit Awards 2024: A spectacular evening of excellence and glamour
Leisure Hotels Group introduces new ‘Sociotel’ concept
JM Financial Private Equity invests Rs 45 Crore in Energy Beverages Pvt Ltd
Fortune Hotels inks a new alliance in Palampur
Pride Hotels debuts in Punjab
One Rep Global inaugurates luxury roadshow, ‘One Edge’