The hospitality sector in Bangalore is expected to be tested in the short term as the capacity is being doubled. However, in the long term, the new supply is expected to be absorbed into the marketplace as more development and growth occurs, according to a latest report by realty consultancy firm Jones Lang LaSalle (JLL).
The rapid development in the city’s commercial sector has also triggered growth of the local lodging industry. Bangalore presently has 7,734 rooms spread across 48 hotels and the present supply is expected to witness a significant increase with 22 hotels in the branded segment coming up in the near future. Bangalore’s lodging market was amongst the best performing hospitality markets in India in terms of RevPAR performance till 2008-09. A strong market performance in the past attracted a large number of developers to enter the hospitality space in the city. The subsequent global recession and addition of new supply caused the market-wide RevPAR to decline in 2009-10. Nevertheless, as the global and domestic economies stabilised, “The Bangalore lodging market bounced back once again in 2010-11. Overall, as a result of its strong lodging demand fundamentals, coupled with an excellent connectivity, we expect the market to maintain its position as a prominent hospitality market in India in the future,” Sudeep Ja in, Executive Vice President, India - Jones Lang LaSalle Hotels said.
According to Jain, 5-star deluxe hotels represent 15 per cent of the total supply while 5-star hotels dominate with 33 per cent of the total inventory. The 4-star hotels contribute 21 per cent whereas the 3-star category contributes 24 per cent. “In the past, the serviced apartment segment was categorised under the local unbranded sector. However, with the recent accelerated growth in extended stay demand in the city, the serviced apartment segment has been attracting the attention of major international lodging brands. Serviced apartments in Bangalore are presently being offered by four properties in the branded segment namely Oakwood Premier Prestige, Royal Orchid Suites, Mercure Residences and Ascott Group’s recently opened Citadines collectively contributing 6 per cent to the overall branded lodging supply. The 2-star category contributes only 1 per cent to the overall branded supply,” Jain noted.
Market-wide occupancy was at 67 per cent during 2008-09 before witnessing a steep decline to about 55 per cent in 2009-10 as a result of substantial supply increases coupled with an ensuing economic downturn. Several companies also scaled down their travels due to the slowdown. However, as domestic and international economies stabilised in 2010-11, demand levels strengthened and signs of a recovery were apparent with occupancy bouncing back to 65 per cent.
“Market-wide average rates peaked in 2008-09 at Rs 12,000 before declining almost 32 per cent in 2009-10 as a consequence of the global economic recession. However, 2010-11 numbers show a rise of 7 per cent in the average rates taking it to a level of Rs 8,700. Historically, Bangalore has been ranked amongst the top performing markets in India in terms of RevPAR (Revenue per Available Room) performance. Overall, as a result of occupancy and average rate dynamics, market-wide RevPAR declined by almost 44 per cent in 2009-10 from its peak in the preceding year.
This decline can be attributed to the addition of new supply during this period as well as the ensuing economic downturn. However, data reviewed for the period 2010-11 reveals RevPAR levels have bounced back 25 per cent driven by an increase in occupancy levels,” Jain highlighted. According to JLL, 9,779 rooms are expected to enter the Bangalore market over the next five years. The upcoming supply includes 4,831 rooms under construction and another 4,948 rooms which are at various stages of planning.
The upcoming inventory is mostly an amalgamation of domestic and international brands spread over various lodging segments.
According to JLL Hotels’ research, in addition to the hotels under construction, a further 4,948 hotel rooms are at various stages of planning.
