 "Bangalore hotel market to see supply glut")
The occupancy rate of Bangalore hotels has been declining gradually from a high of 81.4 per cent in 2004-05.
Bangalore witnessed a 10.7 per cent increase in supply of rooms in 2012-13 to 8,536 rooms from 7,713 in the previous year, while occupancy rate dipped marginally to 55.8 per cent from 56.6 per cent in the previous year, according to HVS Research, which has been tracking Indian hotel industry for the past 16 years.
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Leading the addition of new rooms is Marriott International, which has added two new hotels till now and is set to add two more in the next one month with an inventory of over 1,000 rooms.
The average rate, on the other hand, decreased 4.5 per cent to Rs 6,007 in 2012-13 owing to the entry of budget and mid-market hotels, which in turn resulted in similar positioned hotels lowering their room rates and adopting a volume strategy for selling their inventory.
JW Marriott Hotels & Resorts announced the launch of its first hotel in Bangalore on Wednesday with a 297-room hotel, built at a cost of Rs 750 crore by The Advantage Raheja Group. In February this year, Marriott hotel with 344 rooms was opened at Whitefield on the outskirts of the city. It is set to open a Ritz Carlton hotel on September 30 and Fairfield by Marriott on October 9.
Besides Marriott, other hotel brands entering the city are Hilton and Shangri-La. Marriott International is also readying another eight hotels in Bangalore to be opened in the next three years.
According to Chender Baljee, chairman of Orchid Group of Hotels, five-star category hotels in Bangalore witnessed strong occupancy rates of average 80 per cent during 2008 and dropped to average 60 per cent in 2013. This, he attributes to the high demand for rooms and limited inventory in this category.
“Compared with 2008, when the supply was limited, the situation has changed in 2013. The supply growth has outstripped the demand growth. In 2010, for example, there were 2,729 five-star and above category rooms in Bangalore and there were more than 1,000 rooms under construction, including properties like J W Marriott and Ritz Carlton, which are set to open their hotels this year,” said Shreenath Shastry, analyst with Knight Frank Research.
With the recession spreading its wings all over the country, including Bangalore, occupancy rates too have declined sharply. Some of the hotels have seen demand dropping as more number of hotels have come up in the city, Baljee said.
“Bangalore has almost seen saturation point. However, compared with Pune, Jaipur and Hyderabad, the situation is not as bad. We expect the demand to pick up by the fourth quarter of this year,” Baljee said.
The demand and supply scenario is set to change further with more hotels getting ready to open in Bangalore.
“We were late entrants in Bangalore compared with our presence in other cities like Mumbai. But, we will be adding 1,000 rooms in the city across four properties this year. We are also in the process of adding eight more hotels in the city in the next three years,” Rajeev Menon, area vice president, South Asia & Australia, Marriott Hotels India Pvt Ltd, said.
The strong IT/BT sector that attracts a large number of foreign nationals has driven the growth of the hospitality sector in Bangalore over the last decade.
“Bangalore is a favoured destination for events like weddings, conferences and banquets. However, the city is facing oversupply of hotel rooms already. If more hotels come here, then we will have much lower occupancy levels. I don’t think, this city can absorb any more hotels in the next five years given the current economic growth levels,” said Deepak Raheja, chairman of The Advantage Raheja Group, which has built the property for JW Marriott in the city centre.
Raheja is in talks with Starwood for a possibility of a tie-up for their new property near international airport in Bangalore.
Bangalore even displaced Mumbai (including Navi Mumbai) with the highest future supply in the country in 2012-13 totaling 10,731 proposed rooms and this helped the city retail top position in terms of active supply as well, said HVS Research.
Over the next five years, the city is expected to witness the highest number of new hotel rooms in the country, of which 75 per cent is under active development. Another 4,350 rooms are likely to be added in the city by 2017-18.