Luxury rooms at lower cost in B'lore

Oversupply may lead to a drop in rates.

The phenomenal run that the luxury hotels in Bangalore had over the last few years has made room rates among the highest in the world. And, it is now plateauing out. Room rates are likely to remain "stable" in the near future and may even turn "soft" in two to three years.

In the near term, the pack made up of the Leela, Oberoi, Taj, Le Meridien and Grand Ashok are heading for their second year of "consolidation".

They will officially revise tariffs upwards from October, when the traditional peak season for Indian hoteliers commences, but admit it will likely cover only rack (published) rates, leaving aside the negotiated rates for corporate clients which are subject to volume discounts.

From the end of next year, for the next few years Bangalore could double the number of luxury hotel rooms from the present 2,500. While 2,523 rooms were accounted for by specific projects already announced, industry watchers say that anything in the region of 3,000-3,500 rooms can be added in five years.

Federation of Hotel and Restaurant Associations of India (FHRAI) committee member and area director of Taj West End P K Mohankumar said, "Several hotel projects have been announced but it will be a while before they are up and running. There is likely to be an oversupply initially but prices are expected to stabilise in the long run."

Most luxury hotels in the city claim an occupancy rate of 75-85 per cent, and expect to be fully booked in the winter months, the traditional peak season. But the variation between peak and non-peak occupancy is small in Bangalore.

"The period April to September is usually considered a soft period but Bangalore doesn't really have an off-season, except for the Christmas-New Year period when foreign guests return for a fortnight," a spokesperson for The Leela Palace said. Leela has also witnessed a marginal increase in peak period occupancy in the last three years.

Room rents at the Leela range from Rs 15,000 per night for the deluxe room to Rs 95,000 per night for the Maharaja suite. At Taj West End, rents range from Rs 15,000 per night for a single room to Rs 50,000 a night for the presidential suite.

Rooms at Le Meridien are priced at Rs 13,500 for a single deluxe room to Rs 22,000 per night for a deluxe suite. These prices exclude the standard luxury tax of 12 per cent.

However, average room rents (ARR) in Bangalore have declined in the last 12 months. A recent survey by UK-based corporate services company Hogg Robinson Group (HRG) has observed that room rents in Bangalore have fallen nearly 7 per cent, caused by a "slowdown due to plateauing of its growth as a base for corporate outsourcing and international call centres".

As per the HRG report, ARR in Bangalore is down to £162.04 (Rs 13, 344) in 2007 from £174.56 (Rs 14,375) in 2006.

The report indicates that hotel industry rates were "beginning to settle to more sustainable figures" as several companies had already moved their business to the city.

Presumably, this means fewer visiting executives. Bangalore has also been rated as the fifth most expensive city in the world, in terms of ARR after Moscow, New York, Dubai and Paris.