Demand for cheap hotel rooms on the rise

October 12, 2008	(Be the first to rate this story!)  Loading ...
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The market for affordable hotel rooms is expanding. Corporates have been cutting down on their travel tremendously and those who have a compelling reason to travel are being asked to downgrade their accommodation. Budget and mid-market hotels (anything that is cheaper than five-star) are making hay of the situation. “More and more people would want to cut down on their accommodation cost and opt for budget hotels. Business won’t stop because of the downturn but there will be more cost cutting among corporates and therefore a higher demand for lower cost hotels,” he says. “The demand for mid-scale has definitely gone up. The growth in average rates has been higher than the drop in occupancy which indicates a positive trend,” says Siddharth Thakar executive director at HVS, a hospitality consultancy.

“We are already seeing it happening and it will only get better for us with time,” says Vilas Pawar CEO of Choice Hotels India. He has seen a positive shift towards the budget segment. “Business travel overall is still robust and happening but some corporate clients are trading down from 4-5-star hotels to three-star and budget category hotels,” explains Arup Sen executive director Cox & Kings. To counter the slowdown, Ajay Bakaya executive director Sarovar Hotels feels that the smarter way for any hotels is to up its sales effort and rationalise big costs such as payroll, energy and food and beverage. “The downturn though will be felt less in our segment (mid-market) but it will be much more dramatic in the five-star segment,” he says.

His hotels haven’t seen much of an impact, either way, yet. “One still hasn’t been able to gauge the full impact but, going forward, value proposition and location is bound to play a key role,” says Suresh Kumar president Fortune Park Hotels, a subsidiary of ITC, with presence in 41 cities. The CEO of Lemon Tree, Patu Keswani agrees that there is a noticeable shift with people now seeking alternatives to five-star accommodation. “Corporates are cutting down on their discretionary expenses. So the ones who were earlier staying in a five-star are now open to staying in a four or even three-star hotels,” he adds. He expects this segment to see at least a 5-10% increase in revenue as compared to last year. Luxury and first-class hotels in continental Europe and the UK have started exhibiting declining occupancies caused by a slowdown in the world economy and curtailment of travel budgets. The budget segment has proved very resilient with occupancy levels actually increasing.

Business might be scaling new heights for this segment but where are the hotels? “There will be a shortage of room inventory in the budget and mid-market segment across the country,” says Mr Sahni. The next few years though will see a number of hotels coming up in this category. Mr Thakar says over 53,000 rooms will be added to the inventory of mid-market and budget hotels in India. “In the last 6 months we have signed up 21 new properties which will open over the next 2 years. This will add around 1,800 rooms to our portfolio,” said Mr Pawar. The company is adding 540 rooms over the next 12 months in the NCR, to prepare for the Commonwealth Games. Ginger which at present has 14 properties is expecting to get to the figure of 30 hotels by 2010 (approximately 3,000 rooms). Sarovar has 25 hotels under construction, of which 15 will be up and running by 2010, adding about 1,500 rooms.

News Published Under:   Real Estate India, Hotel Industry in India |

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