Showing posts with label Compounded Annual Growth Rate. Show all posts
Showing posts with label Compounded Annual Growth Rate. Show all posts

Friday 6 April 2012

Chennai’s hospitality sector poised for a turnaround

Chennai

Demand for business accommodation is dominated in Chennai by the business segment contributing 70-75% of the total demand, followed by meetings, incentives, conferences and exhibitions (10-15%) and leisure (5-10%) demand sources, according to a hotels’ research report by Jones Lang LaSalle.

The city is home to various industries such as manufacturing, automobile, auto-ancillaries, IT/ITES and shipping, thus underpinning strong business demand. It has witnessed strong growth in Grade A office stock over the past four years, increasing by around 50%. The city has a total stock of 4.3 million square meters as of 4Q2011 that resulted in a compounded annual growth rate (CAGR) of 16.1% over four years.

Chennai is also a tourist’s paradise due to the presence of various tourist attractions within and around the city. Its proximity to destinations like Mahabalipuram and Puducherry add impetus to the growth of leisure demand sources. Being an economic and cultural centre in South India, the city has witnessed double-digit growth growth in international and domestic visitors over the past eight years. International passenger traffic has increased from 2 million during 2003-04 to almost 4.2 million in 2010-11. Domestic passenger traffic has increased from 2.5 million in 2003-04 to 2010-11.

Chennai has 29 branded hotels with 4,656 rooms spread across different categories. Some of the existing key players operating in the city include ITC, Starwood, Hyatt, Hilton, Marriott, Oberoi, Taj and Carlson. Prominent operators that are coming up with new properties include Leela, IHB and Accor.

There are 17 hotels currently under construction in the branded segment in the city with a total inventory of 3,620 rooms. However, this number excludes an inventory of almost 2,500 rooms that are currently in various stages of planning and expected to hit the market within the next five to seven years.

The majority of the upcoming supply in the city will be in the luxury segment (35%), with fewer rooms planned in the midscale (25%), upper upscale (18%) and economy segments (15%). Serviced apartments and upscale segments contribute only 4% and 3% respectively.

During 2010-11, occupancy levels reached 68%, which is 4% higher than the market high of 64% in 2008-09 and boosted by the overwhelming rise in domestic as well as international passenger traffic resulting from stabilising global economies. Offsetting this has been continued decline in average rates with ADR averaging Rs 6,100 in 2010-11, 12% below the 2008-09 high of Rs 7,000.

For YTD 2012, occupancy levels registered a decline of 300 basis points to reach 65%. A significant increase in supply can be attributed to this decline. Average rates, however, remained stable during this period at approximately Rs 6,100.

Growing business activity in the region has caught the attention of developers and operators, resulting in an inflow of branded hotel inventory into the market. Occupancy levels have been fairly stable during the past four years. However, with a continuous addition of branded supply, the market has witnessed a decline in average. Because of this, there has been an 11% decline in RevPAR since 2008-09.

According to JLL’s research, in the near-term, marketwise average rates and occupancy levels will remain constrained as new supply opens in 2012 and 2013. However, the adverse impact is expected to be short-lived with significant commercial and industrial developments planned across the city. In particular, the Sriperumbudur submarket is expected to become an attractive and desirable market for hotel investors and operators as it is emerging as a significant growth corridor in Chennai with no branded hotel supply to date.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/chennais-hospitality-sector-poised-for-a-turnaround