Serviced Apartments Check in as Hotels Lag

June 10, 2008	(Be the first to rate this story!)  Loading ...
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Having filled the breach left by an acute shortage of hotel rooms in India, the serviced apartments segment is coming into its own with the entry of corporates aiming for consistent quality standards as they try and tap into a lucrative market.

A measure of the shortage is the fact that India has about 1.1 lakh hotel rooms compared to 1.35 lakh rooms in just the Chinese commercial capital Shanghai. The Planning Commission estimates the scarcity at 1.5 lakh rooms by 2010.

On the other hand, there are no reliable estimates of the number of serviced apartments, largely dominated by unorganised players. “Serviced apartments have found favour so far only as an offshoot of corporate needs and/or due to shortage of hotel rooms in most cities. In today’s supply shortage scenario, it seems like whatever one can build will get filled up, even if only through word of mouth,” says Cushman & Wakefield Hospitality director (South Asia) Akshay Kulkarni.

However, he predicts tariffs to fall by 15%-20% in 4-5 years as branded products become popular and unbranded ones die out. “The occupancy in the unbranded segment of the serviced apartments will actually drop as more and more limited-service, economy, branded products come to the fore. Without doubt the per-room realisation for the developer or the manager will not be the same in the next 5 years,” Mr Kulkarni adds.

Experts also see international players digging into the Indian market. An example is Brigade Hospitality’s tie-up with the European group Accor for the upcoming Mercure Homestead Residences in Bangalore’s Koramangala suburb.

“Our occupancy levels are 75-80% throughout the year. We have 120 keys on offer and plan to have an additional 126 at Mercure Homestead. With our inventory increasing in a year or two, we see the occupancies settling down at about 75%,” Brigade Hospitality CEO Vineet Verma says.

However, there are those who believe that it would be too optimistic to expect the good times to continue for the serviced apartments business. “One has to look at the growth of the popularity of serviced apartments in context of the huge investments being made in hotels now,” says Taj West End regional GM P K Mohan Kumar.

The market-share of hotels is bound to increase as there are about a dozen new hotels coming up in Bangalore alone, which will add 4000-5000 rooms to the existing inventory by 2012, he says. “As the mismatch in inventory gets corrected, and mid-market as well as budget hotels gain territory and share of the market, serviced apartments will become the last choice since hotels are now looking to accommodate longterm stayers also.” Being able to provide services tailored to the needs of customers is the USP of serviced apartments and the ones that can do so consistently have no need to worry, Brigade’s Mr Verma says.

“At serviced apartments, one is willing to change and customise most services to suit the guest’s specific needs. The space one gets is well planned and addresses the basic requirements of an extended stay, like providing a well-equipped kitchenette etc.”

Furthermore, as hotel room tariffs sky-rocket, service apartments are seen as an economical option. “Currently our choices are not really governed by the full range of products,” feels Mr Kulkarni.

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

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