More hotel rooms in city awaiting guests

HYDERABAD: The city's distressed hospitality sector is heading for a tough time with more hotels and hotel rooms in the pipeline adding to the political uncertainty that the State in general and Hyderabad in particular is going through.

Unlike other cities, Hyderabad is facing an entirely different situation because of mixed reasons.The hotel sector had seen better times during 2007-09 when the city had the second highest occupancy rate in the country.

The hotels sector is eagerly waiting to return to its lost glory.P Sravan Kumar, Excellence Hospitality Projects, says, "The situation is forcing many five-star hotels to reduce tariffs on par with what the city's three-star hotels would offer.

Things may not change for another two years."Calling optimism that the sector will see some momentum post June 2014 a myth, Kumar says, with three possible new governments, one in Telangana, one in Seemandhra and the one at the Centre, times don't look any bright for the sector."

When asked if the events have slowed down in the city and if that has any impact on the occupancy rate, he explains the city usually sees three kinds of events- social, corporate, and industry and trade oriented. The social events are not affected by political and economic uncertainty and have been happening as usual in the city.

The weddings and other events which were happening about five years back infunction or wedding halls are now happening in hotels. Corporates, mostly from other cities had been driving occupancy and business to the city hotels.

Hotel chains operating across the country had been tapping this opportunity which had been offering packages that are uniform across cities, thus diverting their clients to respective chain hotels in the city.

Trade and industry fairs have taken a beating in the last few years.
Orbitz Exhibitions chief operating officer Ramesh Vartak said, 'One of our recent events in Hyderabad had been severely affected by the political uncertainty.

Exhibitors did not get the desired outcome from the city event. We had been conducting events in HITEX, Hyderabad since 2006-07 when the conditions were congenial. Due to growing fear, many were skeptical in hosting or attending events.'

'Event organisers plan their events 12-18 months ahead. And if the situation is not friendly, every stakeholder is upset. We have observed over the years that pharmaceutical and chemical industry events can still happen in the city because of the active presence of pharmaceuticals industry.'Vartak adds, 'Hotel infrastructure is a key ingredient for event success.

Proximity of hotels to the exhibition venue is always desired. Another reason why many big events cannot happen in Hyderabad which could have otherwise helped the hotels industry in terms of improved occupancy rates is that the largest exhibition venue in Hyderabad is of 12,000 sq m whereas exhibition venues in New Delhi and Mumbai have 20,000 sq m exhibition space.

Hyderabad is suitable for mid-sized industry exhibitions or events.'He said Orbitz which is also into travels business has observed that occupancy rates across India had been tricky including Hyderabad.

Those event management firms that have also got travels setup had been able to get its exhibitors or participants with reasonable tariff compared to those who don't have travel backing.

According to ICRA, Hyderabad has been suffering from large additions of hotel rooms over the past two years, estimated to be around 1,900 rooms between 2011 and 2013. Another 1,310 rooms are set to be added up to 2015 which includes the Trident and Hyatt Gachibowli which are already opened, besides Oberoi, Oakwood, Hyatt Regency, Four Points by Sheraton and Double Tree by Hilton.

'We are seeing in the recent years that the hotels sector is covering its losses in the rooms business with food and beverages business,'adds Sravan Kumar.

Veera Babu, Cushman & Wakefield's (C&W), Hyderabad, said, Hyderabad has a total hotel inventory of approximately 6,448 rooms. During 2013, inventory grew at 6 per cent, due to the recent opening of Trident Hotel (323 Keys) in Madhapur.

The average inventory per hotel is currently 46 keys with Westin having 428 Keys in Madhapur. Within Hyderabad, the midscale segment constituted 45 per cent of the total inventory, followed by the upper upscale segment with 19 per cent, upscale and midscale with 17 per cent, and budget with 2 per cent.

Hyderabad currently has a total upcoming supply of 4,057 keys; of which 46 per cent is in the midscale segment, 23 per cent is in the budget segment, 13 per cent in the luxury segment, 12 per cent in the upscale segment and 6 per cent in the upper upscale segment.

Approximately 50 per cent of the upcoming supply is expected to open in the current year, which includes brands such as Formule 1 (174Keys), Mercure (128 Keys), The Oberoi (220 keys), Hyatt Place (148 keys), etc.

Of the major micro markets existing in Hyderabad, Gachibowli and Madhapur are seen to be the prime destinations for upcoming commercial and office space ventures in the city, which is likely to augment an increase in room night demand in the future for the micro-markets.

The city yet still lacks stability; the State most particularly saw a number of civil disruptions during 2011 and 2012. The AOR in 2014 is expected to be 42 per cent with an ADR of Rs 5,231.

'Hotel inventory is likely to go up by 30 per cent in 12-18 months and that would have an impact on occupancy rates.

However, we have to remember that Hyderabad has grown as an important centre in the MICE industry (Meeting, Incentives, Conferencing and Exhibitions) over a period of time and even the State government has strongly supported several major events over the last 2-3 years.

State should continue to focus on attract tourism, business community to increase the occupancy rates in the city hotels,' Babu says.

Presenting his observation on why the demand and supply gap is emerging and where the timing is affected, Kumar says, 'Those hotel companies that borrowed funds for developing new properties years ago have completed the projects, but those companies which had been pumping funds through their internal accruals had been slowing their projects for some years that those are the projects that will be commissioned in the next few years in the city.

'Meanwhile, Hyderabad hotel sector is also witnessing some asset deals. The latest being Royal Orchid Hotels selling its city five-star property Regenta One to Gurgaon-based hotel development and investment group SAMHI for Rs 179 crore. The 159-room hotel is the second property that the chain has sold to SAMHI since 2012.