Hotel industry expected to see increase of 65% in room supply

Several projects after running into delays for the last couple of years are likely to be completed in next four years

Hotel industry, already reeling under poor occupancy, is expected to see an increase of 65% in room supply with nearly 52,000 keys expected to be added till 2017.

The projections, by real estate consultant Cushman and Wakefield, say that several projects after running into delays for the last couple of years are likely to be completed in the next four years.

Nearly one-third of the upcoming supply is expected in Delhi and the National Capital Region which has a total of 26,500 hotel rooms, in places including the Aerocity, Noida, Greater Noida, Faridabad and Manesar. The highest increase will be seen in Kolkata which will have a doubling of supply with the addition of over 3,800 rooms.

“Despite a significant number of leisure travel both International and Domestic, hoteliers are seen to be concentrating on business destinations, specifically gateway markets of NCR, Mumbai and Bangalore,” said Akshay Kulkarni, Regional Director – Hospitality, South and South East Asia, Cushman & Wakefield.

Of the total expected supply of hotel rooms till 2017, midscale hotels have the highest share with a pipeline of 18,500 rooms, followed by luxury which is estimated at 10,300 keys.The hotel industry report also said that as the opportunities for the development of Greenfield hotel projects decrease in the key hospitality markets like Delhi, Mumbai and Bangalore, the focus has shifted towards regional cities for growth.

“Taking cue from the economic fundamentals of the cities, which are strong on the basis of a more holistic growth of services as well as industrial sector, these cities are expected to see a corresponding rise in the estimated demand in the next few years as well,” Kulkarni added.

Industry experts feel that the increase in room supply will put pressure on the room rates but only temporarily and demand will match up in a couple of years.

“There is an increase in supply but business is still growing in India, supply is outstripping demand. But supply will catch up. We will see more careful investment in the region moving forward,” said Douglas Martell, VP-operations South West Asia, Intercontinental Hotel Group.