The city has always been a listed destination for conferences and meetings and now with the Commonwealth Games round the corner, the hotel industry is expected to grow a lot.
The national capital region (NCR) Delhi has been witnessing rapid transformation in the recent times.
Backed by the infrastructure development on the back of the soon to commence Commonwealth Games 2010 and a coinciding revival in the over all economic condition, the city has been witnessing a growth in interest across all segments – from investors, to multi-national corporations and tourist alike.
With tourism promotion, IT/ITES bouncing back, companies rolling out plans for expansion, availability of medical facilities, gateway to the rest of world through it world class airport, upgraded road and metro rail infrastructure; the city is expected to attract foreign and domestic footfalls.
Government promoted campaigns like ‘Incredible India’ and ‘Atithi Devo Bhavah’ (ADB) are expected to change Touring experience in the city for good and would consequently benefit the hotel industry.
Hotel Inventory-NCR Delhi:
At present, the NCR market comprises of approximately 16,214 hotel rooms, of which 79% are branded across 3 star, 4 star, 5 star and 5 star deluxe categories.
Of the total, 21% is constituted by unbranded segment, comprising of hotels which are primarily two star or budget category.
The 5 star deluxe segment contributes about 21%, 5 star about 28%, 4 star about 27% and 3 star about 24% of the total room supply in NCR Delhi. Most of the upscale and luxury hotels are situated in and around Central Delhi.
The prime clusters for this category are the areas covering, Sardar Patel Marg, Connaught Place, South Delhi and upcoming business hubs in Gurgaon and Noida.
Four star hotels are primarily situated in the closer proximity of CBD and SBD areas within a radius of 2-5 km. The upcoming business hubs in Noida- Sector 62 and areas around, in Gurgaon Sector 29, Udyog Vihar, Sector14 and Sector 27 are the prime address for the hotels in this category.
Price conscious 3 star hotels in branded and non branded categories are spread uniformly across NCR region with services ranging from limited services to customized services for their guests.
The resorts operational in the region are located in the peripheral locations of the city including resorts on National Highway (NH) 8 in Manesar, Sohna, and outskirts of Noida.
The list below indicates prominent upper upscale and upscale hotels that are operational in NCR.
Hotel Performance:
The hospitality market in the city showed signs of recovery in Q4, 2009 and it continued into Q1, 2010 as well.
In year 2008-2009 under economic turmoil FTA reduced by a substantial percentage as corporates had downsized their budget for travels and impact was evident on hospitality industry in the city.
With addition of rooms and slow down in the global economy, the revenues dwindled last year and subsequently, the volume of both business and leisure travel declined resulting in decreased revenue per available room.
Additionally, the unforeseen events like terrorist attacks and epidemic caused significant decline in leisure and business traffic.
However with recovery in financial markets and economy bouncing back, volumes are picking up now and this has helped in rationalization of pricing of the hotel.
Until mid 2009 the city saw promotion of tailor-made packages, discounted rates, budget packages etc. but with improving market situation enquires have started to convert into business opportunities. Nevertheless, post recession and the terror attack crunch, the hospitality industry of the city is recovering swiftly. Subsequently, the markets achieved strong occupancy of 71% in 2010 increasing from 66% of year 2009.
The improvement in the numbers on account of the gradual revival of the economy has certainly helped hotels to recover from losses of 2009/10. In Q1, 2010 and until June 2010 hotels witnessed occupancy of 71% with an ARR of
Rs. 8,858.
Being the capital city and a major commercial hub of Northern India with corporate office in the city, a large part of demand (about 67%) is generated through corporates. Of this demand, around 10% is extended stay segment, 10% on account of MICE and leisure about 21.2%.
The hotel industry in the city until now was dominated by a few large domestic hotel companies, but with rapid growth of all sectors, global brands have forayed into NCR and have set up operations in the city through management contracts and franchise arrangements.
To name a few recently opened hotels in the city include Courtyard Marriott in Gurgaon with 198 keys and Hilton International in West Delhi with 102 rooms operational.
Upcoming Inventory:
The city has always been amongst the listed destinations for conferences and meetings and now with the Commonwealth Games round the corner, the hotel industry is expected to reach new heights.
However, with an aim to host such a mega event successfully the paucity of rooms which is a perpetual lack in supply needs to be addressed.
In an endeavour to overcome this shortage of hotel rooms, the government has introduced the Bed and Breakfast Scheme with the objective of enabling house owners to rent out their premises to the tourists coming for the Games.
Expansion plans of hotel chains such as Carlson, Accor, Leela, Dusit Thani etc would add to the existing inventory in the city. The new projects in the pipeline comprise of a mixture of domestic as well as international brand ranging from upper upscale Taj, Taj Gateway, Oberoi and Radisson to budget and mid-scale segments like Country Inn and Suites, Lemon Tree and Premier Inn.
It is expected to witness additional 15,000 rooms by 2013. The enhancement in the inventory over the next couple of years is sure to change the dynamics of the sector by making it more service oriented and business options which are value for money. Refer to the graphical representation of upcoming inventory.
The proposed supply is in the upscale and luxury segment is expected to make market more competitive in this segment and would exert downward pressure on rates and occupancies.
The cluster of upcoming hotels being built are in East Delhi locations in Mayur Vihar – Ghaziabad belt which is expected to see brands such as Crowne Plaza, Renaissance ,Holiday Inn; in West Delhi in locations of Dwarka with brands such as Park Plaza, in South Delhi with Leela and Hyatt residencies and in Gurgaon with brands such as Pullman, Country Inn and Suites, Radisson and Oberoi near Manesar,. North Delhi is expected to see only one hotel that of Radisson in Rohini.
The hospitality sector has already started to experience the pressure due to the CWG as it is estimated that the current projects would be able to meet only 75% of the envisaged demand.
To develop a world class airport, Delhi International Airport Ltd. (DIAL) has taken the initiative to develop a hospitality district near the airport which is certain to change the composition of the room inventory of the micro market.
The concept earmarks five land parcels within the airport complex housing luxury and business hotels, service apartments and a convention centre.
Outlook:
It is expected that by hosting a mega event of Common Wealth Games NCR Delhi region would experience a tourism boom which might help it recover from the loss of 2008-09.
Even though the massive demand would result in increased occupancies, hotels might see some gap in realisation of revenues due to the newly proposed policies by the tourism ministry. Allegedly tourists booking through Games Travel Office would be exempted from luxury tax.
Further, with hoteliers being asked to slash down rates by 15% to 50% as per hotel categories, hotel may be experience a further squeeze on their profit margins.
Huge supply in the city is in pipeline for the business hotels and city might need more room nights supply as the commercial sector in the city is expanding exponentially.
However this would primarily be driven by the absorption in commercial sector which is expected to firm up by end of 2010. If huge commercial space in IT/ITES buildings and SEZ takes off in NCR, the region is bound to graduate to a mature market with an array of hotels in demand.
A new concept in the city is of service apartments primarily catering to the long stay demand. With few players active in the region in this segment, but with increasing demand and cost responsiveness, hoteliers and investors are looking at this option as a promising investment.
With revival in corporate activity, business travel is expected to bounce back sooner compared to the leisure travel market which is one reason that hotel construction is being pursued aggressively in the city.
In brief, the prevailing trends highlight the dynamic opportunities of growth in the hotel industry in the city. But with wider choice in the market, fair share of the hotels demand shall certainly get affected, and a much rationale market would lead to sustainable growth of the hospitality sector.
