Bhubaneswar has been one amongst the many tier II cities in India that has been on the list of prominent developers and operators of branded hotels in the country. However, like many of its ilk, the city has been given the pass by these prominent players with only a handful of primarily Indian brands committing themselves to the market.
This is despite the existant strong demand rationale presented by the established government and private sector businesses, which is expected to grow given the pipeline of real estate, infrastructure and other development projects planned for the future. Being the state capital, Bhubaneswar houses offices of both the state machinery and public sector units. The private sector occupants have traditionally been mining and related with a recent rise in IT/ITES activity.
However, to understand the overall development rationale for a hotel in Bhubaneswar, it would be important to understand the location perspective, the existing and emerging clusters of development and the historical market performance of the sector in the city.
Location perspective
The evolution of Bhubaneswar may be understood in four development phases. These, in the chronology of their development period, are Old Town, New Town and its extensions, Development Corridor I and II. While the Old Town is congested and has little availability of land for any development, the New Town and its extensions are the current hubs for quality hotel developments. However, with the rising land prices in the New Town and reducing land availability, the progression of the city is clearly towards its northern and southern perimeters, which hold high potential for future development.
While the stage of development in New Development Corridor I is advanced with many large scale developments already operational (the Infocity SEZ with occupation by major IT sector companies), the development at New Development Corridor II is still at a nascent stage. Both Development Corridor I and II are currently witnessing interest by hotel developers with many taking up land plots for future development.
Key performance indicators:
The total supply of quality hotel rooms (branded and unbranded) is estimated at approximately 1200. Of these, nearly 580 are in the upscale/midscale category, while the rest range from budget to economy hotel developments. On an average basis, the occupancies achieved by these hotels are estimated at 65% during 2011, with some of the better managed properties doing an average of 70%. During the same period, the average room rates in the upscale category hovers around `5500 per night, which in the midscale and budget properties varies from `3200 to `2300 per night.
Surveying the hospitality market in Bhubaneswar, what emerges is that while a majority of the hotels are recording reasonably high levels of occupancy, rates and have high optimism for continued demand growth, there clearly is a cautious approach to the scale of development. Most hotel properties offer between 50-100 rooms, with only two major brands with national presence operating in the city. The market, therefore, remains untested for any sustainable performance by a large sized midscale or upscale hotel development. The local hoteliers believe that the market is ripe for absorbing larger scale quality room supply and it is perhaps that this new supply will attract and generate the demand that remains unsatisfied in the region. This view is also substantiated by the performance of a new branded hotel, with reasonable supply, in the budget segment that has done phenomenal business since its opening in Bhubaneswar a few years ago.
Bhubaneswar hospitality: worth taking the plunge?
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Bhubaneswar has been one amongst the many tier II cities in India that has been on the list of prominent developers and operators of branded hotels in the country. However, like many of its ilk, the city has been given the pass by these prominent players with only a handful of primarily Indian brands committing themselves to the market.
This is despite the existant strong demand rationale presented by the established government and private sector businesses, which is expected to grow given the pipeline of real estate, infrastructure and other development projects planned for the future. Being the state capital, Bhubaneswar houses offices of both the state machinery and public sector units. The private sector occupants have traditionally been mining and related with a recent rise in IT/ITES activity.
However, to understand the overall development rationale for a hotel in Bhubaneswar, it would be important to understand the location perspective, the existing and emerging clusters of development and the historical market performance of the sector in the city.
Location perspective
The evolution of Bhubaneswar may be understood in four development phases. These, in the chronology of their development period, are Old Town, New Town and its extensions, Development Corridor I and II. While the Old Town is congested and has little availability of land for any development, the New Town and its extensions are the current hubs for quality hotel developments. However, with the rising land prices in the New Town and reducing land availability, the progression of the city is clearly towards its northern and southern perimeters, which hold high potential for future development.
While the stage of development in New Development Corridor I is advanced with many large scale developments already operational (the Infocity SEZ with occupation by major IT sector companies), the development at New Development Corridor II is still at a nascent stage. Both Development Corridor I and II are currently witnessing interest by hotel developers with many taking up land plots for future development.
Key performance indicators:
The total supply of quality hotel rooms (branded and unbranded) is estimated at approximately 1200. Of these, nearly 580 are in the upscale/midscale category, while the rest range from budget to economy hotel developments. On an average basis, the occupancies achieved by these hotels are estimated at 65% during 2011, with some of the better managed properties doing an average of 70%. During the same period, the average room rates in the upscale category hovers around `5500 per night, which in the midscale and budget properties varies from `3200 to `2300 per night.
Surveying the hospitality market in Bhubaneswar, what emerges is that while a majority of the hotels are recording reasonably high levels of occupancy, rates and have high optimism for continued demand growth, there clearly is a cautious approach to the scale of development. Most hotel properties offer between 50-100 rooms, with only two major brands with national presence operating in the city. The market, therefore, remains untested for any sustainable performance by a large sized midscale or upscale hotel development. The local hoteliers believe that the market is ripe for absorbing larger scale quality room supply and it is perhaps that this new supply will attract and generate the demand that remains unsatisfied in the region. This view is also substantiated by the performance of a new branded hotel, with reasonable supply, in the budget segment that has done phenomenal business since its opening in Bhubaneswar a few years ago.
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