 "Southern realtors bank on infotech boom to set up hotels")
South India-based property developers such as Prestige, Brigade and Embassy are betting high on the hotel segment, due to growing demand from the information technology and e-commerce sectors.
This is in contrast to the trend in north and west, where realty majors such as DLF and K Raheja are staying away from building hotels.
Combined, the top southern companies are planning to add a fourth of their current stock or 5,500 hotel rooms in the next couple of years in Bengaluru, says JLL India.
Rough estimates suggest the developers will need to spend Rs 3,300 crore to build these hotels — an upscale room costs Rs 55-65 lakh to erect.
As of March 2015, the number of hotel rooms across major cities in India was 112,284 and the upcoming supply was 49,000.
Most developers are building these hotels as part of their residential or commercial projects.
Prestige Group is building three hotels — Bengaluru Whitefield in Prestige Shantiniketan, The Marriott Bangalore Prestige in Prestige Golfshire and The Conrad from Hilton International on Kensington Road. Prestige plans to spend around Rs 750 crore to build 1,000 rooms in the upcoming hotels. All these are expected to become operational in second quarter of 2016 or the third quarter of 2017.
The Group currently has four operational hotels in the city. It also plans to build its own hospitality brand. “Prestige aims to build a hotel brand for themselves, apart from associating with international hotel chains. In the long term, they aim to start their own mid-segment hotel brand,” said Zaid Sadiq, executive director – liasoning & hospitality.
The Brigade group is currently building four hotels with about 850 rooms, with an investment of Rs 500 crore. It is building the Grand Mercure in Mysuru, Holiday Inn in Chennai, Holiday Inn Express in Bengaluru and an upscale hotel in Kochi.
Bengaluru-based Embassy Group is planning to build four hotels at an investment of Rs 1,300 crore, with a total of 1,500 rooms. These are to come up at its IT parks in Bengaluru-Embassy Manyata and Embassy TechVillage. Its Four Seasons Hotel Bengaluru at Embassy ONE will be operational by late 2017. Currently, it has one hotel under operation.
The Pune-based ABIL group is developing a premium hotel with Starwood Hotels and Resorts on the Vagator beach in Goa. It will have 151 units, including 42 chalets and 12 villas. It will be operational this June and the project cost is around Rs 300 crore.
Consultants say demand for office properties from IT and e-commerce companies is driving the demand. “Bengaluru is also the nation’s leading hub of IT and e-commerce majors, as well as start-ups, which take up the bulk of commercial spaces. The magnitude of business generated in the city from these industries has a close correlation with demand in the hospitality sector,” said Mandeep Lamba, managing director, hotels & hospitality group, JLL India.
Ashok Kumar, managing director of Cresa Partners, a commercial realty services company, says the growth in hotels is driven by commercial growth in Bengaluru, which has resulted in more and more companies expanding, top executives from their headquarters visiting the city, and a number of conferences and seminars there.
Colliers Internationals says Bengaluru, with 13.43 million sq ft of office absorption and 12.85 mn sq ft of new construction, continued to hold its number one position across cities. The city accounted for 33 per cent and 41 per cent, respectively, in total absorption and new supply from the eight major cities in the country this year.
The city's traditional primary office demand driver, IT and IT-enabled services, accounted for 57 per cent (7.7 mn sq ft) of the total absorption, followed by 20 per cent from the BFSI (banking, financial services and insurance) segments, 13 per cent from manufacturing and nine per cent from the others.
US banking major JP Morgan, retail major JC Penney, professional networking site LinkedIn and other prominent names have taken large spaces for back-offices and research centres in IT parks of Bengaluru this year.
DLF, the country’s largest developer and once betting highly on hospitality plans, is not looking to build any new hotels, said executive director Rajeev Talwar.
“Hotels do not have money in them. It is only a real estate value. It is not core business for us anyway,” he said.
DLF once wanted to build 100 hotels through its hospitality arm but dropped the plans. It also bought out the shares held by US-based Hilton in its joint venture with the latter.
Another large operator, K Raheja Corp, holds the same opinion.
“There is so much oversupply in hotel rooms and land prices have become so high, it does not make sense to build hotels,” said Sunil Hingorani, director, finance. Raheja has over half a dozen hotel projects across the country.
