Hotel room shortage reaches crisis proportions

A key element in the infrastructure crisis afflicting Bangalore is the shortage of hotel rooms.

When Business Standard spoke to the leading five-star hotels in the city, the response was unanimous ""demand far outstrips supply and there is no hope for an immediate solution.

As a result, these hotels are running up some of the best revenue yields in the entire country.

As the information technology (IT) and the IT-enabled services (ITeS) sectors continue to propel growth and demand for hotel rooms in the city, Bangalore's unpreparedness in meeting the demand is exposed more and more.

The total number of five-star rooms in the city is between 1,250 and 1,300 rooms. What is most disturbing is that operational managers do not have an idea of how much of additional capacity will satisfy the unmet demand, or whether the new projects underway will ease things somewhere down the road.

This is because there seems no letup in rising demand. The common sentiment is, "The more rooms we can have the better."

According to a head honcho of a well-known BPO unit, "It is embarrassing to see how our clients who come on routine visits or for due diligence have no place to stay here. As a result, they avoid an over-night halt. In fact, during important seminars and conferences, there have been instances where people attend the seminar during the day and fly back to Hyderabad or Chennai in the evening because they manage to get rooms in those cities."

"The demand and supply mismatch is likely to continue for at least another 18-24 months. All categories of hotels are going full as a result of this huge economic explosion in Bangalore," says Hemant Mediratta, regional director-sales, The Oberoi, Bangalore.

Interestingly, Oberoi does not have any expansion plan even with an average 90 per cent room occupancy and an ARR (average room rent) of Rs 10,000-11,000.

Meanwhile, The Leela Palace-Bangalore, which is one the biggest names in the five-star chains, is opting for some unique ways to gain more from every room. With no immediate plans to add more rooms, this hotel seems to be doing more with less.

"As demand continues to increase, we look at various ways of managing our yields better from every room," says Deepak Subbaiah, head-sales and marketing, The Leela Palace-Bangalore.

One obvious way is earn two room nights out of one room in a day by letting it out as soon as a guest has vacated.

The Taj Group has three properties in Bangalore and they account for nearly 390 rooms, with an 80 per cent occupancy.

"Investments in Bangalore is always on the rise. The ITeS business has resulted in more corporate customers dropping by. Our ARR at Taj West End is between Rs 10,500 and 11,000. We are looking at adding more capacity in the near future," says Raki Lalwani, director-sales, Karnataka, The Taj Group. But he declined to reveal how many additional rooms are on the way.

Agrees Lemuel Herbert, general manager, The Park Hotel, Bangalore, "There is a clear gap in the demand and supply situation.

This will continue till new capacity is added.

Besides existing players expanding, we are told that Mariott is also coming in a big way. Despite having built their own complexes for guests, companies like Wipro are always on the lookout for rooms in five-stars. With 110 rooms, we are currently having a 87-90 per cent occupancy rate. Our ARR is Rs 6,000."