IT, financial services driving Hyderabad hospitality market

Though Bangalore continues to lead the domestic hospitality market with an average room rate of Rs 12,020 in the three quarters to December 2005, Hyderabad is emerging as a potential market, driven by the growth of the IT, ITeS, and financial services industries there.

A study by Crisil Research reveals that five-star hotels in Hyderabad recorded the country's highest occupancy rates of 84 per cent during the nine months ended December 2005, up from 77.1 per cent during the same period in 2004. ARRs have also been on the rise, up 36 per cent at Rs 5,955 for the nine months to December 2005.

During the same nine-month period, the occupancy in Bangalore averaged 76.5 per cent, North Mumbai 76.3 per cent, Delhi 75.8 per cent, Kolkata 72.7 per cent, and Chennai 72.6 per cent, respectively.

The development of a greenfield international airport Hyderabad, the country's largest convention centre, and other infrastructural facilities would support the city's growth as a business centre. When completed, the convention centre will have the potential to generate between 18,000-20,000 additional rooms per night. Hyderabad, which competes with Bangalore as an investment destination, is scoring on account of a better infrastructure index. It is a great market and has the potential to emerge as the biggest domestic hospitality market.

IT, ITeS, and financial services have a huge appetite for hotel rooms. They are also high-paying customers and so rates in the city are likely to push up even further. Hyderabad is gaining prominence as an alternate IT destination and there is a huge diversion of traffic from Bangalore to Hyderabad.

According to an analyst with Crisil Research, Hyderabad has an inventory of 1,010 rooms in the premium segment. Given the limited capacity, ARRs in the city could push up by 35 per cent in the next two-three years. Once more capacity enters the market, occupancy levels and rates were likely to taper off.

Among the hotel brands that would enter the market over the next three years are the Novotel, the Leela, the Marrriot, Le Meridien, and the Taj Falaknuma among others.