The Union government is planning to add 100 budget hotels by 2016 in a bid to give a boost to the hospitality sector. The tourism ministry wants to set up these hotels through public-private-partnership (PPP) in one-, two- and three-star categories, besides add 3,440 rooms by the end of the 12th Plan period (2012-17).
The land for building these hotels will be allotted through a “transparent bidding process”, according to tourism ministry’s working group report on the 12th Plan. Companies with a minimum experience of five years in running budget hotels will be allowed to bid for these.
Indian Hotels’ budget brand Ginger operates the IRCTC-Rail Yatri Niwas in Delhi on a PPP model with IRCTC. The company is keen to expand through such arrangements in future, as well. “This is an encouraging development. Availability and affordability of land at the right location is becoming a challenge and, therefore, impacting roll out of hotels, especially in the budget category,” said Prabhat Pani, CEO, Ginger.
| HOSPITALITY FILLIP The tourism ministry plans to invite bids for one-, two- and three-star hotels. It will do so in three steps: |
| Step 1: Identify land banks of land-owning agencies |
| Step 2: Invite bids from private sector players |
| Step 3: Sign PPP deals for a maximum of 20 years |
The PPP agreement will be signed on a build-operate-transfer basis for a period of 20 years. Only after this time frame be a hotel allowed to increase its star-rating above three.
According to a research by consultancy firm HVS India, the number of branded hotel rooms in India would go up by 43 per cent to 102,438 by the end of year 2016 from 71,531 now. Of this, 13,316 rooms would be in the budget category.
The tourism ministry will ask the land-owning agencies at the central and state level — such as the state tourism corporations, local urban bodies, gram panchayats, Indian railways, state road transport corporations and port trusts — to identify suitable land for the construction of budget hotels. Existing properties or land of state tourism corporations will also stand eligible. The ministry plans to provide financial incentives and grants to the land-owning agencies.
In the past few years, several international hospitality chains have entered the Indian market with most setting up luxury or premium hotels. “Several hotels that internationally are mid-market are more in the premium category in India, like Ibis from the Accor group,” according to a senior analyst. “It makes more economic sense to set up a luxury hotel here than budget, as returns are faster and better in luxury.”
The Working Group’s report mentions that high cost and low availability of land were prodding hotels to opt for a higher star category, as the setting up of budget hotels is not commercially viable.
The availability of branded budget hotels, which can offer clean and safe rooms across major cities, is a trigger that can lead to explosive growth in domestic tourism, according to experts. A study by HVS India can easily emulate the growth story of budget hotels in China, where the number of budget and economy hotels increased from just 23 in year 2000 to 1,689 by 2007 — a growth of 7,243 per cent.
