When they started operations in 2009, it wasn't the best time for companies in the hospitality sector as the global recession affected the inflow of travellers into Bangalore. However, in the last two months of the year, there have been signs that the industry is picking up which is making newer hotels optimistic about their revenue growth in the new year.
“When we launched in Bangalore six months ago, business was mellowed. However, we knew the situation was temporary and therefore we did not put any expansion plans on hold,” said a spokesperson of Zuri, a five star hotel in Whitefield. While the occupancy rates remained low in the first three months of its existence, the rates picked up from September and rose to over 50 per cent, it is learnt.
“From the second week of January 2010, we expect occupancy rates to return to over 60 per cent,” added the spokesperson. The company is also going ahead with its plans to set up its next five star hotel in Devanahalli in Bangalore where it is planning a 150-room hotel for an investment of Rs 200 crore.
Industry experts say the average occupancy rates in the first one year for newer hotel brands hovers around 50-55 per cent. However, newer hotels struggled to reach an occupancy rate of 30-40 per cent during some months of 2009. New hotels that started operations in Bangalore this year include Vivanta by Taj, ITC Royal Gardenia, Zuri and the Premier Inn.
Generally, average occupancy rates of hotels rated four star and above are in the 65-70 per cent occupancy bracket. However, the recessionary economy had cut travel budgets for companies resulting into fewer executives travelling into the city for business. This especially hurt Bangalore hotels which are dependent on business travel.
According to Cushman and Wakefield estimates, Bangalore has around 3,198 upscale rooms (five star and above), 2,016 midscale rooms (four-star category) and 3,604 rooms in the budget category of hotels. Nearly 76 per cent of guests staying in upscale and midscale hotels in the city belong to the corporate profile category and similarly in budget hotels, close to 60 per cent of the guests visit for business purposes.
Premier Inn which just started operations in Bangalore is another new player in the hospitality sector this year.
“We are seeing the return of positive sentiments. Demand had taken a beating in the early part of the year due to the recession but we are now seeing a travel of mid-level executives back into the city,” said Saurabh Gupta, general manager of the hotel which opened in November, 2009.
Newer players have also been concerned in 2009 on whether Bangalore could face oversupply. According to Cushman and Wakefield, Bangalore is likely to see the most number of additions in the upscale (five star and above) room category in the next couple of years.
The industry estimates that upcoming supply in Bangalore from 2008-2011 has seen a shift, with nearly 63 per cent of supply expected in the upscale market, unlike the previous years when there was an equal distribution amongst all category of hotels. This has raised a question of whether this could lead to instability in the market.
However, most hotels are of the view that in the long term, the city would be able to absorb the upcoming supply. “In the last one year, there were very little conferences and business was down. But we are seeing an improvement in demand. Air fares are higher which is an indication of the economy picking up,” said Chander Baljee, CMD of Royal Orchid Hotels.
