Notwithstanding the ongoing downturn, the demand for hotel rooms in India in the organised hospitality sector is likely to grow at a Compound Annual Growth Rate (CAGR) of 8-10 per cent between 2008 and 2011, according a Cushman & Wakefield (C&W) report.
A study of 11 cities by the global real estate consultancy firm C&W said, while a demand growth of 8-10 per cent would be seen in 5-star deluxe, 5-star, 4-star and 3-star hotel categories annually, the average CAGR is estimated to be about 22 per cent annually over the same period.
The supply of new hotel rooms in key cities would go up by 80 per cent during the period (roughly 52,220 new rooms), while the Average Room Rents (ARR) are expected to decline.
Among the cities, NCR, Mumbai and Bangalore may see the highest CAGR in demand averaging 14-20 per cent, while Chennai is likely to witness a drop of 3 per cent yoy, it said.
"Despite the current economic slowdown, the CAGR for hotel room demand in India in the organised sector for 5-star deluxe, 5-star, 4-star and 3-star categories is expected to be in the range of 8-10 per cent per annum from 2008 to 2011, while the average supply CAGR is estimated to be approximately 22 per cent per annum over the same period," the report said.
"NCR (20 per cent), Mumbai (15 per cent) and Bangalore (14 per cent) are expected to witness the highest CAGR in demand from 2008-2011. While the current occupancy rate in Chennai stands at 75 per cent, a significant addition of supply in the coming years is likely to result in a deceleration in demand by three per cent year-on-year for the next three years," it added.
C&W said the expected rise is demand would be due to factors like India's popularity as a tourist destination, strong economic fundamentals, a continued interest from MNCs and a steady growth in domestic travellers, which would negate the effects of the current downturn.