Realism has set into the industry, and there is renewed confidence among developers and investors. A substantial inventory will hit the market in 2010, says Akshay Kulkarni.
Towards the beginning of 2009, it was evident that hotels were clearly no longer the favourite flavour of the month or year. People started to hold and fold, that is, hold the current project development and fold the ARR of the operational ones.
Debt servicing was becoming an issue. All the sites that had been auctioned at mega premiums were being re-assessed. Tier III destinations were being shunned without a second thought. Tier II destinations were no longer conducive to anything more than three-star products or lower mid-priced products.
By mid 2009, the industry got hopeful of positive changes in time to come as realism set in. Projects that were on a go-slow mode had started to progress making way for construction activity. Financial institutions were getting projects re-assessed to ensure that they were building to more sustainable levels than before.
The last quarter of 2009 has probably seen more activity than the rest of the year put together.
There is renewed interest in looking at hotel plots; brands are seeing more activity and actually coming to a closure of LOIs and MOUs that had been getting delayed and seeing push-back for some time now. Overall, there is a definite air of positivity and a belief that 2010 will see a major improvement in the situation.
With this as the background, everybody seems to be asking the eternal crystal ball gazing question – what will the future look like? While perception has a large role to play in the way people actually approach the hotel business, it is indeed governed by a variety of factors like the business environment in industries other than hospitality, the overall comfort that people sense in the economy and in factors driving the economy, inflation, stock markets and last but not least, safety and security. How much the improvement would be only time will tell, but the coming year will definitely be better for all businesses and hence will see an improvement in the hospitality business too.
Travel advisories will be lifted, confidence in the stock markets is back, and that allows people to make money and also spend some of it – the coming year’s budget is also expected to make some major announcements in terms of foreign investment in the country, and will definitely be a more long-term impact budget as compared to the one this year.
There is a fair bit of political stability and that will help devise and implement some serious policies that will benefit the nation in the long run. Airline passenger movement too has seen a positive growth across most markets on the international as well as the domestic front.
The coming months will also bring the confidence back among those that are developing projects.
A substantial inventory is expected to hit the market over the second half of the year 2010, including what could probably be the largest hotel in southern India – The Grand Chola in Chennai – as well as some of the high-end hotels like the Shangri-La and Trident in Mumbai, the Pullman in Gurgaon, and the re-opening of the Taj and the Oberoi in Mumbai, not to forget the whole lot of B&Bs and guest-house type accommodation from the unorganised sector to make up for the lack of rooms for the Commonwealth Games.
There will also be a spurt of some new sites that will become available in key areas in Mumbai and Delhi, like the airport sites in both destinations; there will also be some activity at the two new airports of Bangalore and Hyderabad.
One does anticipate that there will be at least 20,000 odd rooms that will hit the market across India towards the end of 2010. In terms of the type of product, apart from those mentioned above, there are likely to be more numbers though accompanied by probably lesser number of rooms through the mid-priced, upper mid market brands like the Courtyards, Holiday Inns, Fortunes, Four Points, and suchlike.
Those who developed in the downturn and continue to do so today, will reap the benefits as the market picks up, and, while it may not hit the 2007 levels, it will definitely be a marked improvement over yesterday and today.
Market research will take prominence in the decision making process so as to help build the right product for the right market and consumer at the right price. While the year 2010 will come with treading with caution and prudence, learnings over the past seven-to-eight quarters will certainly help in keeping the balance.
