Budget hotels, serviced apts sprouting fast

Bangalore: Mid-market hotel brands and serviced apartment chains are fighting tooth and nail for the keys to growth, and perhaps, the same customers.

Both segments are on an expansion spree to cash in on the slowdown that has thrown up good demand for cheaper hotel rooms.

The high average room rates (ARR), despite the current slump, have reduced hotel occupancies by 57% in cities like Bangalore, Hyderabad and Pune for star hotels.

But budget hotel chains and serviced apartments have benefited from this. Not surprisingly many of them have charted out aggressive plans including expanding in the hinterland.

For instance, Roots Corporation Ltd, a wholly owned subsidiary of the Indian Hotels Company, plans to launch 30 more properties by 2010 under the Ginger brand. The firm will add hotels in Guwahati, Durg, Surat, Chennai, Jamshedpur and Pune among others.

“We have identified the locations after detailed studies across various parameters such as market potential, clusters of clientele and peak periods,” Prabhat Pani, chief executive officer & director, Roots Corporation Ltd, said.

Likewise, Fortune Hotels Pvt Ltd, a wholly owned subsidiary of ITC Ltd, is planning 26 hotels across India by mid-2011. “There had been minor hiccups but there is still a huge opportunity to add new property in the mid segment. All the properties are in different stages of development and Fortune is the fastest growing brand for ITC Hotels,” ITC Ltd – Hotels Division senior executive vice president, Pawan Verma, said.

The firm has signed management contracts for 55 hotels with a total room inventory of 4,400 rooms. It is also in talks with Bangalore based JP Group to operate and manage its luxury hotel in Mysore. Fortune has 29 hotels in operation comprising an inventory of 2,400 rooms.

Mumbai based Sarovar Hotels Pvt Ltd, one of the largest budget and mid-market chains, is looking at garnering higher business by adding 800 more rooms in eight hotels to its existing 4,500 in 35 hotels by the end of this year.

Sarovar will invest about Rs 250 crore, excluding land cost, to develop hotels in Bangalore, Jaipur, Gurgaon, and Chandigarh among others, said Ajay Bakaya, executive director, Sarovar Hotels.

With competition increasing in the affordable stay segment, average room rates will stabilise by 2010, said Tarandeep Singh, principal consultant (hospitality), Technopak Advisors.

“There will be excess inventory and hotels will be cautious while revising rates,” he said, adding the industry will pick up by September 2010.

Serviced apartment players are letting go of their cautiousness and are re-looking at the market to close deals on affordable rates. Many of the operators are in talks with developers to enter into management contracts and are bargaining hard to add rooms.

Priyadarshi Samal, director, operation, Chalet Hospitality, a leading serviced apartment player in Bangalore said he believed this is the right time to get value for money property. “The value of good property has come down and we plan to add another 100 rooms in next three to six months.”

Keshav Baljee, co-promoter Royal Orchid Hotel, said, “We are not much affected by the downturn and are currently operating on healthy occupancy.” The firm is adding extended holiday concept in Hyderabad, and is in talks with several developers to build and operate properties in Mumbai, Chennai and National Capital Region. It is also eyeing distressed property which can be converted into serviced apartments.

Source : http://www.dnaindia.com/money/report_budget-hotels-serviced-apts-sprouting-fast_1272389