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Rates, occupancy to be under pressure as 50,000 hotel rooms come up in 6 cities in 5 years

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The average occupancy and room rates for hotels in India are expected to be under further pressure with 50,000 new hotel rooms coming up in the top six cities over the next five years. A Cushman & Wakefield - Confederation of Indian Industry report titled 'Indian Hospitality Story 2012 & Beyond' says 2012 will see a supply of 14,800 rooms coming in across cities. Over the five years, the national capital region will see the maximum number of new rooms getting built at 17,550, followed by Mumbai with 10,200 rooms and Bangalore with 9,400 rooms.
The addition of new inventory, says the report, will be concentrated in the potential growth areas around airports, commercial growth corridors, industrial corridors and SEZs, which have emerged in the last few years as a result of growth in IT/ITeS, trade and commerce. According to the report, the top six cites witnessed an average occupancy rate (AOR) of 58% with an average room rate (ARR) of Rs 5,400 in the first half of 2012. "The current averages record a marginal decline of 4% in AOR and 5% in ARR over the average of 2011 (full year) performance. "Occupancy rates may see an upward trend in the second half of 2012 keeping ARRs steady. However, since there is a substantial supply that is expected to enter the market over the new few years, the pressure on occupancy rate and ARRs, will continue.
The phasing of the new inventory and gradual growth in the demand for hotels will help keep the rates at modest levels across the country," says Akshay Kulkarni, regional director, hospitality, south and south east Asia at Cushman & Wakefield. "" However going forward we expect ARRs to improve in the next 12- 18 months on account of stability in economy and expected growth in tourism in India."" The decline in average occupancy at popular destinations was primarily due to addition of supply in major cities in the first half of the current year. "On the other hand, a moderate slowdown in global economies led many corporations to curtail travel, while individual travelers have also been cautious due to fiscal uncertainties," says the report.
Source: Economic Times

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