Hotels breathe easy

In Bangalore, the unorganised sector steps in to ease the pressure on hotels.

Not so long ago, trying to get a five-star hotel room in Bangalore was a harrowing task during any season of the year.

The rates were astronomical, easily surpassing the $400 figure and on some days even touching $600, and hotels were always full. During the recent air show in the city, some visitors even decided to stay in Chennai and travel to Bangalore by road every day.

New hotels are being planned in the city to cope with the rising demand, but the supply is unlikely to ease for another three to four years.

Now here’s the good news. The tide seems to be changing. According to Manav Thadani, managing director, HVS International-India, a hospitality consulting company, there is at least a 13-14 per cent drop in occupancy points, though the demand continues to be buoyant.

“Over the last two years, the unorganised sector has grown at a fast clip because of very high rates in the city,” says Thadani.

He mentioned a recent survey by his firm which says there are at least 2,000 rooms in the unorganised sector in Bangalore, which includes guest houses and serviced apartments (it does not include the guests houses taken up by bigger IT companies and the 450 rooms inside the Infosys campus).

Surprisingly, the unorganised sector is bigger here than the branded business —there are less than 2,000 rooms in the branded five-star category in the city.

The guests houses and serviced apartments, the alternative accommodation options now open to corporates, are going for anywhere between Rs 1,500 and Rs 4,000 with breakfast, which compared to paying Rs 12,000-16,000 plus for a five-star hotel room is much better.

Quite a bit of business (40-45 per cent) to Bangalore is long stay, says Shylender Jindal, CEO of SK International, a large corporate travel agency, which does quite a bit business in Bangalore. For the company, business to Bangalore has grown over 25 per cent in the last one year.

“Many large IT companies are using serviced apartments and guest houses in the city now,” says Jindal, who also adds that earlier there were no options in the city.

According to sources in the travel agency business, long stay guests to Bangalore (seven nights and above) have been looking at an alternative accommodation option for a while now.

“Many of these alternative accommodations are close to most work locations as well, which augurs well for companies who then manage to beat Bangalore’s horrid traffic as well,” says the source. “Let’s not call it a slump. It is more a business shift which has caused a decrease in occupancy of about 10-12 per cent,” he says.

In the last one year, new supply has entered the market in the luxury segment. About 400-450 new rooms have been added, with Leela and Orchid adding a 100 rooms each to their existing properties, Ista starting with 140-odd rooms and The Chancery Pavilion starting with about 180 rooms.

According to a prominent five-star hotel source in Bangalore, this new supply is also one of the reasons why there is some dip in occupancy.

“The weekend market has been hit. It comes down to about 60 per cent and therefore all major hotels are offering attractive pricing during the weekends,” says the source, adding, “The weekdays are still doing over 90 per cent occupancy.”

“About 300-400 new room supply has come in which has rationalised rates up to 5-10 per cent,” says another hotel industry source, but is very clear that “there is no panic situation for hotels in Bangalore”.

Anand Rao, general manager, ITC Windsor Manor in Bangalore, too feels there is “definitely a slight downturn in occupancy in the market but it has to be seen in the context of the unprecedented boom the market experienced over the last few years. The growth was over 20-25 per cent for so long and now it is becoming normal. For sure it is not as buoyant as it was.”

He attributes this to the fact that Bangalore as a destination is very IT dependent and the recent (slight) slowdown because of the appreciating rupee meant slowdown in business traffic to city. But he certainly does not discount the effect of alternative accommodation on business.

“The average room rates have dipped in the city,” he says, “by at least 7-8 per cent and it should be down even further as more new room supply comes in later.”