India set for budget hotel boom

10,000 rooms to be added in the next 2 years.

India is set to add 10,000 budget hotel rooms in the next two years in response to the burgeoning demand for low-cost accommodation across the country.

According to department of tourism estimates, India currently has nearly 30,000 rooms in the three-star category priced between Rs 2,000 and Rs 3,500.

A host of global chains and domestic operators are opening budget hotels, buoyed by estimates that international tourist arrivals are rising by over 15 per cent and are set to touch 14.5 million by the end of this year. The business travelling segment is rising at an even faster pace.

The average price of these rooms will be Rs 1,500-2,000 per day compared with five-star accommodation that comes at an average rate of Rs 13,500-Rs 15,000.

Industry analysts say till recently there was a lack of clarity in the segmentation of hotels in India because all five-star hotels were considered as luxury hotels and everything else as budget. But hoteliers in India are catching up fast with the global segmentation of luxury, mid-scale, budget and economy hotels.

More than five foreign hospitality brands and seven domestic brands have already announced plans to set up budget and economy hotels in the country.

An executive of the Taj group, which operates its budget hotels under the Ginger brand name, said with tourist inflow increasing rapidly, hotels in the country were eager to tap the potential in the mid-market segment.

"At present, there are no budget or economy hotels in India in the true sense. Three-star hotels are now considered as budget hotels. The Tata group and other international majors are trying to create a new low-cost hotel segment in India," said an industry analyst.

Ginger, which has already launched hotels in Hardwar and Pune, plans to open 30 more in places like Mysore, Thiruvananthapuram, Durgapur, Panjim, Agartala, Tirupur, Pondicherry, Baddi and Nashik, adding 3,000 rooms by the end of 2008. The average room rent in these hotels will be Rs 1,000.

International hotel chain Accor recently entered into a joint venture with Emaar MGF to bring its Formule 1 brand of budget hotels to India. It will build 100 hotels over 10 years with an investment of Rs 1,350 crore. It will also launch its Ibis brand. Accor's Formule 1 rooms will be priced at Rs 1,500 in major cities and Rs 1,000 in Tier II towns.

On the other hand, players like Sarovar Hotels have entered this segment with its brand Hometel. It will build Hometels in Mumbai, Pune, Ahmedabad, Indore and Chandigarh at a cost of Rs 230 crore over the next two years.

South India-based Choice Hotels will also set up 8-10 budget properties each year, in the next 2-3 years with an investment of Rs 700-750 crore.