Hotel ind to be constrained in near term

With around 3,620 new hotel rooms in the branded segment expected to be operational in three years from now, the hospitality industry in Chennai is expected to be constrained in the near term, though the adverse impact is expected to be short-lived, a study by real estate services firm Jones Lang Lasalle, India said.

The city, at present, has around 29 branded hotels with 4,656 rooms spread across different categories. Around 17 hotels with a total inventory of 3,620 rooms in the branded segment are under construction. Besides, an inventory of almost 2,500 rooms are in various stages of planning and likely to be operational within the next 5-7 years.

“In the near term, we expect market wide average rates and occupancy levels to remain constrained as new supply opens in 2012 and 2013 with a high proportion of new rooms in the luxury and upper upscale segments,” it said. However, the adverse impact will to be short-lived with significant commercial and industrial developments planned across the city.

Of the new rooms, almost 35 per cent is expected in the luxury segment in Chennai, while 25 per cent would be in midscale and the economy segment would be around 15 per cent. Service apartment and upscale segments would contribute to around 4 and 3 per cent respectively.

The occupancy levels, which increased to 68 per cent in 2010-11 from 64 per cent in 2008-09, declined in the first three months of 2012. For the year-to-date 2012, the occupancy levels registered a decline of 300 basis points to 65 per cent, owing to increase in supply.

The average daily rate (ADR) for rooms remained stable during the period at around Rs 6,100. The ADR saw a decline in 2010-11, when the occupancy levels grew, to Rs 6,100, almost 12 per cent down from the Rs 7,000 ADR in 2008-09.

The revenue per available room in Chennai reached Rs 4,400 in 2008-09, and later started declining as demand softened and new supply entered. “However, with a continuous addition of branded supply, the market has witnessed a decline in average rates. Because of this, there has been an 11 per cent decline in revenue per available room since 2008-09,” it said.