AP to see spurt in hotels

Last Updated: Sun, Dec 11, 2011 20:02 hrs

More hotels coming up despite dwindling occupancy rates.

Around 20 hotels – including 7-8 three-five star outfits – are set to add roughly 2,000 rooms in the twin cities with an investment of over Rs 500 crore.

This is despite the Telangana agitation and declining occupancy rates. However, these were conceived and grounded a couple of years back when the agitation for the statehood was in a dormant state, says Jagdish Rao, secretary of AP Hotels Association.

The new ones are not worried though as they are eyeing future prospects after 3-4 years, once the Telengana issue is solved.

Marriott Hotel, which has two properties in Hyderabad, is planing to add two more - Courtyard by Marriott at Hitec City in Hyderabad and at Vishakhapatnam. Similarly, city-based Green Park Hotels and Resorts Limited, which owns the Green Park brand, would add two new properties at the same place, said Javed, general manager of Green Park hotel.

The Andhra Pradesh Tourism Development Corporation also plans to set up a budget hotel at Hitec City in public-private partnership.

Madhucon Nama Hotels Pvt Ltd, a subsidiary of city-based Madhucon Projects, is planning two hotel projects here near Jawaharlal Nehru Technological University at Kukatpally. The properties will be managed by InterContinental Hotels Group — the world’s largest hotel management company in terms of rooms.

Starwood Hotels is also planning to set up a hotel in the city. It recently developed Four Points by Sheraton in Visakhapatnam in partnership with Duet India Hotels Private Limited.

The Taj GVK Hotels and Resorts, a strategic alliance between GVK group and Indian Hotels Company Ltd, plans to set up a 189-room property near Shamshabad airport.

The existing ones, however, have seen their business take a hit in the last two-three years. Around 25 per cent drop in turnover was witnessed across the 15,000 hotels and restaurants in the city, said GV Krishnaiah, president of AP Hotels Association.

First it was the recession and then the Telengana agitation that resulted in a decline in occupancy rates and revenue across hotels.

Occupancy rates have come down to 40-50 per cent from 60-70 per cent. Some hoteliers claim that 2007 and 2008 were the peak years when the occupancy rate was more than 70 per cent. Room tariffs have also dropped by Rs 300-500. The five-star rates have come down to three-star level and likewise.

The Hyderabad Marriott Hotel & Convention Centre & Courtyard has seen a 15 per cent decline in occupancy rate since 2007, and 20 per cent decline in room tariffs, its general manager Ramesh Jackson says.

According to Tejus Jose, resident manager of Novotel hotel at Hitec City, the 288-room hotel occupancy dropped to 50 per cent from 70 per cent earlier.

“Major corporate houses have branches across the country and they organise employee and client meetings in other places due to safety issues. We have so far lost 1,100 room nights this year. Majority were group events, which got diverted to Bangalore and other cities. But on average, 500 room nights got cancelled this year,” says Rajesh Gopalakrishnan, resident manager, Novotel Hyderabad Airport.

Another factor responsible for the decline in occupancy rates is the mushrooming hotels in the city. Currently, Hyderabad has around 6,000 hotel rooms. “As there is no growth in the market, the new hotels are taking away the business of the existing ones,” he adds.

In the last three years, Park Hotel, Aditya Sarovar, Lemon Tree, Red Fox, Westin and Novotel Shamshabad, along with some standalone properties, entered the city. Around 3,500 rooms have been added during this period under the three-five stars category.

However, at some hotels such as Novotel Shamshabad, the occupancy rate is increasing. But this is mainly because of the rising air traffic and developments around the airport area - the Bangalore-Hyderabad highway, Srisailam highway, and mushrooming companies. Its occupancy increased to 62 per cent from 49 per cent last year, said Gopalakrishnan.

The hotel industry is highly unorganised and mostly follows two seasons -- peak from October to March and lean from April to September. Two major aspects, which drive the growth are group segment, where travellers come for workshops and seminars, and the individual segment. Group travellers account for 20-25 of the business while the rest comes from individual.

The industry is now in a situation similar to the one being faced by the airline sector before low-cost carriers entered the market. “The operating costs in this sector have gone up along with market prices and taxes. In the midst of all problems, the AP government has raised the VAT to 5 per cent from 4 per cent on all commodities,” Rao points out.

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