India Digest 2008

INDIA D gest 2008

CONTENTS India

1

Bangalore

11

Chennai

18

Delhi

25

Hyderabad

34

Mumbai

41

Pune

51

Jones Lang LaSalle Hotels Jones Lang LaSalle Hotels Jones LaSalle Hotels, the first leading global investment services Jones LangLang LaSalle Hotels, the first and and leading global hotelhotel investment services firm,firm,in 2007 in 2007 in addition to bespoke research. Jones LaSalle Hotels’ services in addition to bespoke clientclient research. Jones LangLang LaSalle Hotels’ services spanspan is uniquely positioned to provide the depth breadth of advice required by hotelthe hospitality is uniquely positioned to provide bothboth the depth and and breadth of advice required by hotel the hospitality spectrum; luxury single assets portfolios to select service spectrum; fromfrom luxury single assets and and largelarge portfolios to select service investors companies, through a robust integrated network. In 2007,and and investors and and hotelhotel companies, through a robust and and integrated locallocal network. In 2007, budget hotels, resorts pubs. services include investment sales, mergers budget hotels, resorts and and pubs. TheirTheir services include investment sales, mergers Jones LaSalle Hotels provided purchase advice on 259 transactionsand and Jones LangLang LaSalle Hotels provided salesale and and purchase advice on 259 hotelhotel transactions acquisitions, capital raising, valuation appraisal, management, strategic acquisitions, capital raising, valuation and and appraisal, assetasset management, strategic globally; representing a combined of US$13.9 billion, a total of 54,763 roomsplanning, globally; representing a combined valuevalue of USD13.9 billion, a total of 54,763 hotelhotel rooms planning, operator selection, management contract negotiation, consulting, industry operator selection, management contract negotiation, consulting, industry 84 cities. In addition advisory valuation services provided on 660 assignmentsresearch in 84incities. In addition advisory and and valuation services werewere provided on 660 assignments research project development services. Jones LaSalle Hotels’ clients and and project development services. Jones LangLang LaSalle Hotels’ clients havehave globally for 182,048 rooms across cities. global comprises access globally for 182,048 rooms across moremore thanthan 300 300 cities. The The global teamteam comprises access to resources the resources its parent company, Jones LaSalle (NYSE: to the of itsofparent company, Jones LangLang LaSalle (NYSE: JLL).JLL). specialists, operating 27 offices 16 countries. advice 236 236 hotelhotel specialists, operating fromfrom 27 offices in 16incountries. The The firm’sfirm’s advice is is www.joneslanglasallehotels.com www.joneslanglasallehotels.com supported a dedicated global research team, which produced 45 publications supported by aby dedicated global research team, which produced overover 45 publications

Digest 2008: India

INDIA

MARKET OUTLOOK

India has become a favoured destination for global investors and multinational corporations ever since it

The outlook for India’s tourism and hotel industry is

opened its economy in the early nineties. Although

upbeat. Key factors driving the tourism boom include

sectors such as business processing, information

India’s sustained economic growth, strong foreign direct

technology, telecommunications, and manufacturing,

investment inflows, increased air networks, the

have prospered in recent years, India's economy

availability of cheaper air travel, a strong domestic

remains largely driven by the agricultural sector.

market and aggressive marketing campaigns.

Despite this, India's economy has performed well with

Challenges relating to inadequate tourism infrastructure

the contribution from the services and manufacturing

still remain, but are not enough to dampen the bullish

sectors growing by 9.4% in the fiscal year ending March

outlook for the Indian hotel market.

2007. Preliminary estimates by the government according to the Union Budget 2008-2009 show a

Encouraged by this optimistic tourism outlook, many

growth rate of 8.5% for the fiscal year ending March

developers, investors and international hotel management

2008. For the next financial year (FY), analysts expect

companies are jumping onto the India hotel bandwagon.

real GDP to grow by 7.9%.

A number of the Indian real estate players view hotels as a natural extension and synergy to their growing real

While the Indian economy will be affected from

estate portfolios. The major cities that are the hub of

moderation in global economic growth, any negative

economic and real estate development in India are:

impact is expected to be minimal. Analysts also

Bangalore, Chennai, National Capital Region/Delhi

anticipate some slowing in growth rates which reflect

(comprising the capital city Delhi and suburbs of Noida,

an overheated economy such as that of China (PRC).

Gurgaon, Faridabad, Ghaziabad and Greater Noida), Hyderabad, Kolkata, Mumbai and Pune.

Economic Snapshot - India Indicator*

2005

2006

2007

2008F

2009F

Real GDP Growth (%)

9.2

9.4

8.5

7.9

7.4

Inward FDI (USD billion)

6.7

17.5

19.0

18.0

20.0

Inflation/CPI (%)

4.2

6.2

5.8

5.2

5.0

Prime Lending Rates (%)

10.8

11.2

13.0

11.3

10.7

Exchange Rates (INR Per USD)

44.1

45.3

41.3

40.0

39.0

8.1

7.6

7.2

6.8

6.4

Unemployment Rate (%)

* For fiscal year beginning April and ending March F: Forecasts Source: Actual - Central Statistical Organization, Forecasts - Economist Intelligence Unit (EIU), January 2008 1

Jones Lang LaSalle Hotels

Digest 2008: India

TOURISM MARKET OVERVIEW

round destination, with a focus on both generic and niche areas. "Chasing the Monsoon" is the new theme for the west Asian market.

Key Trends and Demand Drivers l

India, which ranks after China (PRC) as the world's

l

The government has also introduced initiatives

second most populous country, has experienced

to spur growth in the hospitality sector. Tax holidays

a tourism boom in recent years. Bolstered by a

for two-, three- and four-star hotels established in

multi-faceted tourism product that ranges from 27

specified districts that have UNESCO World Heritage

world heritage sites to religious relics, spa/mountain

Sites and convention centres with large seating

resorts and wildlife parks, India has much to offer

capacities in the National Capital Territory of Delhi

leisure travellers.

and in the adjacent urban areas of Faridabad, Gurgaon, Ghaziabad or Gautam Budh Nagar, have

l

l

The growing Indian economy will spur business

been announced to foster development prior to the

travel. The strong performance of the corporate

Commonwealth Games in 2010. In addition, there

sector and the growth in the economy has led to

are proposals to improve the tourism infrastructure

an unprecedented surge in business travel. GDP

that will lead to increased travel. These proposals

grew at a robust 9.4% in 2006-07 and is expected

include constructing 33,000 kilometres of the National

to grow by another 8.5% in 2007-08. Furthermore,

Highway in the Golden Quadrilateral, North-South

the industrial and services sectors have recorded

and East-West Corridor areas, improving identified

double-digit growth rates. These undoubtedly

ports to facilitate cruise tourism and evaluating

will continue to raise the level of business travel

public-private partnerships to connect identified

in the country.

circuits and destinations by rail.

The liberalisation of the airline industry will promote

l

Medical tourism will also result in additional

increased travel by both international and domestic

demand for hotel rooms. This sector has gained

travellers, further fuelling growth in the hotel sector.

momentum in the past few years, given the cost

Open skies policies and direct international flights

advantage and emergence of high quality

to the US and Europe have increased the country's

healthcare services in India where a choice of

accessibility, raising international traveller flows.

airlines, hotels, transportation, food and sightseeing

In addition, increased frequency of existing

is offered along with medical treatment in the form

routes and the introduction of additional routes

of packages. The country's medical tourism

by low cost carriers (LCC) such as Indigo, Spice

industry is thriving, encouraged by the introduction

Air, Jet Lite and Go Air will enhance domestic

of a medical visa. In addition, the Indian

travel flows.

government has announced plans to promote medical tourism with an investment of INR260

l

Recognising the importance of the tourism

billion for funding relevant infrastructure including

industry, the government has made large strides

affordable hospitals and budget hotels for patients

in marketing India internationally. Building on

and their relatives. Due to the lack of a "single

the success of the Incredible India campaign in

window" clearance system, foreign investors have

previous years, the Ministry of Tourism has

faced problems investing in this sector, and the

launched an integrated international media

Indian government is looking at ways to improve

campaign to promote India as "must-see" year-

the system.

2

Jones Lang LaSalle Hotels

Digest 2008: India

International Visitor Arrivals

l

In tandem with the increase in foreign arrivals, foreign exchange earnings soared by 34% over 2006 values to INR480 billion in 2007.

India has set a tourism target of 10 million international

l

tourist arrivals by 2010, the year of the Commonwealth Games in Delhi.

l

Leisure travel (96.6%) remains the primary reason for travel to India, followed by business

l

Preliminary statistics from the Ministry of Tourism

(2.8%), according to statistics sourced to the

indicate that inbound tourist arrivals had already

Ministry of Tourism. While we expect the overall

reached a 10-year high of approximately five

trend to remain unchanged over the next few

million in 2007. This represents a 13% growth over

years, the proportion of business travellers

the previous year and the fourth consecutive year

could increase with the rise in foreign

of positive growth in inbound foreign travellers.

investments to India.

Compared with the 2.4 million international arrivals in 2002, the number of foreign visitors to India has increased by an impressive 86%.

International Visitor Arrivals to India 6

30 25 20

4

15 10

3

5

2

0 -5

1 0

Annual Growth (%)

Number of Visitors (million)

5

-10 1997

1998

1999

Number of Visitors (million)

2000

2001

2002

2003

2004

2005

2006

2007E

-15

Annual Growth (%)

E: Estimates Source: Ministry of Tourism, PATA (Pacific Asia Travel Association), Jones Lang LaSalle Hotels

Total Number of International Visitor Arrivals

Year 2007

Growth Over 2006

Historical CAGR* (1997-2007)

5.0m

13.0%

8.6%

* Compound Annual Growth Rate Source: Ministry of Tourism, PATA, Jones Lang LaSalle Hotels

3

Jones Lang LaSalle Hotels

Digest 2008: India

International Visitor Arrivals to India in 2005 - By Main Purpose of Visit*

Conference 0.2% Education & Employment 0.4% Business 2.8% Tourism & Others 96.6%

* Updated official figures not available Source: Ministry of TourismSource: Ministry of Tourism

Major International Source Markets

l

In January 2007 India-based Jet Airways launched direct daily flights from Delhi and Kolkata to

l

All major source markets recorded positive growth

Bangkok. The same year also saw the airline

in 2006, with the UK and the US maintaining their

serving the New Delhi-Toronto and Mumbai-Newark

positions as India's two largest foreign source

route via their European hub, Brussels.

markets, according to latest available statistics from the Ministry of Tourism.

l

Reflecting strong travel demand for India, Singapore Airlines now operates six flights a week to Bangalore

l

Nepal, Sri Lanka, Japan and Malaysia were the

while Japan Airlines started daily flights between

major source markets. Notably, the number of arrivals

Tokyo and New Delhi in October 2007 to meet

from Nepal showed the highest year-on-year increase

the business demand on that route. Other cities

among top Asian markets in 2006.

such as Kolkata, Hyderabad and Chennai are also served by direct international flights from major

l

source markets.

While the UK and the US are expected to remain India's two largest foreign source markets, arrivals from Asia are expected to rise with the availability of more flights to India.

4

Jones Lang LaSalle Hotels

Digest 2008: India

Domestic Tourism

strong economic indicators, expanded air networks and the liberalisation of services.

l

India's domestic tourism market is significant and growing. According to the Ministry of Tourism, the

l

Pending the release of official data, this growth

number of domestic travellers has increased steadily

is expected to have continued into 2006 with

from 140 million in 1996 to 391 million in 2005 (latest

indicative statistics from the Ministry of Tourism

available statistics), a year-on-year increase of 7%.

suggesting that it might have crossed the

The growth in domestic tourism is attributable to

460-million mark.

the increasingly affluent and growing population,

Domestic Tourism in India* 500

20 15

400 350

10

300

5

250

0

200 150

-5

100

-10

50 0

Annual Growth (%)

Number of Visitors (million)

450

1996

1997

1998

1999

Number of Visitors (million)

2000

2001

2002

2003

2004

2005

2006F

-15

Annual Growth (%)

* Updated official figures not available F: Forecasts Source: Ministry of Tourism, Jones Lang LaSalle Hotels

Total Number of Domestic Visitors**

Year 2005

Growth Over 2004

Historical CAGR* (1996-2005)

390.5m

6.6%

12.1%

* Compound Annual Growth Rate ** Updated official figures not available Source: Ministry of Tourism, Jones Lang LaSalle Hotels

6

Jones Lang LaSalle Hotels

Digest 2008: India

growth in room rates and prompted the entry of new

HOTEL MARKET OVERVIEW

players. To address the huge demand-supply imbalance, we understand efforts will be directed

Existing Supply

towards building 150,000 hotel rooms in the next l

Based on the facilities and services provided, the

four years, in addition to the launch of a new "Bed

Ministry of Tourism approves and classifies hotels

and Breakfast" scheme to meet the requirements.

in India into eight categories, namely five-star deluxe, five-star, four-star, three-star, two-star, one-star,

l

The proposed known additions to supply are expected to be rapidly absorbed as they come

heritage and classification-awaited hotels.

on line over the next two to three years. After that l

As at the end of 2006, India had an estimated 1,169

we expect room rates to adjust to more realistic

approved hotels accounting for 75,787 rooms. The

levels. Markets such as Bangalore - which is

majority of this supply was located in Delhi, Mumbai,

generating one of the highest ADRs in India - are

Bangalore, Chennai and Hyderabad.

expected to experience a substantial rate correction by the end of the decade.

l

Historically, the high land prices in many of the

Additions to Supply

key cities have resulted in hotels being developed in the upper tier categories, causing a scarcity of supply in the lower categories. In its recent budget,

l

According to our research, the six major markets

the government has provided tax incentives to

have approximately 28,000 new rooms planned

develop one-, two- and three-star hotels in and

by 2011: Bangalore, Hyderabad and Pune will

around Delhi.

be most significantly impacted as room supply is forecast to increase almost 250% by 2011; in

Market Demand

Delhi/NCR, the majority of supply is being developed in Gurgaon and nearby Noida with

l

Aggressive growth in revenue per available room

almost 100% rooms is expected to be completed

(RevPAR) has been recorded in the three key

by 2011; while Mumbai and Chennai are expected

Indian cities of Delhi/NCR, Mumbai and Bangalore

to record growth rates of 35% and 55% respectively.

over the past five financial years. In FY2006-07, the five-star deluxe and five-star hotel segment in

l

Chennai has established itself as a preferred

Delhi/NCR and Mumbai reported growth in average

destination for the IT/ITeS (Information

room rates (ADR) of about 40% over the previous

Technology/Information Technology enabled

year, while Bangalore reported almost 20% ADR

services) industry. The major brands expected to

growth over the same period. In comparison, the

enter in the market in 2009 such as Hilton, Hyatt

occupancy growth has been less aggressive and in

and JW Marriot will raise the standard of

certain markets such as Bangalore, occupancies

accommodation. Hyderabad has very few rooms

have stagnated and even declined.

compared with Delhi and Mumbai. Most hotels are now concentrated in the central business district

l

Demand for rooms in India particularly in the key

(CBD) and upcoming markets of IT/ITeS. The Taj

cities (e.g. Delhi/NCR, Mumbai and Bangalore) is

Group’s hotels are expected to commence

exceeding supply. This has fuelled the aggressive

operations in 2008.

7

Jones Lang LaSalle Hotels

Digest 2008: India

l

It is difficult to get accurate information on future

l

Credit Suisse, one of the world's top investment

developments in India, including hotels. There is

banks, launched its domestic brokerage operations

an unusually long approval process which delays

in India earlier this year and recently obtained its

projects and presents significant barriers to entry,

Indian merchant banking licence. Credit Suisse's

particularly for foreigners. Land is very expensive

real estate fund will acquire 10-15% in a hotel chain

everywhere and quality sites for hotels are even

in a structured deal. This is Credit Suisse's second

harder to locate. In some cases, part of this delay

investment in the real estate sector, the first being

is caused by the amalgamation of land which is

its acquisition of 75% of a INR3-billion InfoTech park

time-consuming as it requires purchasing land from

and five-star hotel project from Pune-based

different owners.

developer, Vascon Engineers. l

THE INVESTMENT MARKET

The Orchid Group of Hotels is planning to invest over INR10 billion to set up seven five-star properties in key centres across the country as it

l

In November 2007 DLF Ltd. announced its equal

mulls an international foray with properties in China

partnership with Amanresorts to enter into definitive

(PRC) and South Africa. It is also planning to add

agreements to acquire a controlling interest in the

nearly 2,000 rooms at seven locations across the

group. The entire transaction, when completed,

country. The company has entered into management

is estimated to be valued at INR16 billion, with

contracts for 10 hotels set to open acoss the country

an assumed debt of approximately INR6 billion.

over the next two years.

In addition to expanding its resort locations, Amanresorts is developing projects in key gateway

l

Milan-based Domina Hotel Group announced in

cities around the world, the first of which is scheduled

November 2007 that it would develop 25 hotels

to open in New Delhi in 2008.

through a joint venture and invest INR24 billion. In India, its first hotel is already under construction

l

US hospitality major Carlson is taking a 26% stake

and will be marketed under the new brand Vedic

in a new venture with the Unitech group to introduce

Domina Hotels & Resorts. Another four are

the Regent hospitality brand to India. The joint

expected to be built within five years.

venture will develop a luxury hotel property located at Greater Noida with an estimated

l

It was announced in December 2007 that Kamat Hotels had bought a 60% stake in Concept

investment of INR4.5 billion.

Hospitality for INR127 per share. The key hotels l

Domestic mid- to economy-segment group Lemon

Concept will manage include Seasons in Pune,

Tree Hotels has announced that Kotak Mahindra

Wall Street in Jaipur and Manor Floatel in Delhi.

Realty Fund has invested INR320 million in the

All of these now fall under the management of

company. In a related development, Kotak

Kamat Hotels. A total of 650 rooms will be under

Mahindra Realty Fund is investing about INR20

the listed Kamat Hotels entity which currently

million in Red Fox Hotels which proposes to

operates about 600 rooms.

open limited-service economy hotels in the price range of INR800-2,000 per night.

8

Jones Lang LaSalle Hotels

Digest 2008: India

l

Kotak India Real Estate Fund has just acquired an

l

Oberoi Hotels is fast expanding in India, Abu Dhabi,

approximate 11.11% stake in the Mumbai-based

the Maldives, Cambodia and Dubai, partly through

The Pride Group of Hotels at a cost of INR450

management contracts and also through investing

million. The group, which currently operates four

about INR5 billion of its own funds. The Group has

five-star hotels, has announced a INR3.5-billion

hired Kotak Mahindra to help raise INR4 billion via

expansion and renovation plan which includes setting

debt and new equity.

up five-star hotels in Mumbai, Goa, Bangalore and Hyderabad in addition to a resort hotel and spa at

l

India's Parsvnath Developers Limited (Parsvnath)

Alibaug. The management envisages an overall

has signed an agreement with conglomerate ITC's

inventory of 1,150 rooms in key cities by end 2009.

Fortune Park Hotels to manage 50 hotels comprising 4,100 rooms for Parsvnath Hotels Limited, a

l

l

Dubai Ventures, the private equity arm of Dubai

subsidiary of Parsvnath. Parsvnath Hotels is

Investment Group, has bought a 5% stake in Delhi-

expected to invest approximately INR25.4 billion to

based Bharat Hotels for INR1.6 billion - the deal

develop and own 50 hotels in India which will

values the company at INR32 billion. The hospitality

comprise 20 five-star hotels, 20 four-star hotels and

chain plans to raise up to INR10 billion for the

10 three-star and budget hotels between 2011 and

expansion of six properties under construction and

2013. The hotels will come under the brands of

has recently announced an international foray

Fortune Select, which are likely to have at least

through a joint venture with the Dubai-based

100 rooms each; Fortune Park, which are expected

Nakheel Group - Grand Fort Dubai is set to open

to have 75 or more rooms; and other brands such

in 2009. Other hotels are under construction

as Fortune Inn and Fortune Faith, which are likely

and scheduled to open over the next two years

to have at least 50 rooms. Parsvnath plans to

including The Grand Jaipur, The Grand Resort

eventually develop 75 to 100 hotels across India,

Bekal, The Grand Ahmedabad, The Grand

especially in the second- and third-tier cities, as

Chandigarh and The Grand Noida.

well as other major centres.

DB Realty, a domestic real estate fund, is investing

l

Choice Hotels India (CHI) has announced a INR7.6

about INR3.2 billion in a 320-room five-star

billion franchise and management plan to partner

property in Goa. Hyatt International will manage

with various investors to develop 20 new hotels with

and market the property. The project is likely to be

approximately 2,000 guestrooms in India's major,

completed by the second quarter of 2009.

tier-one and tier-two cities by 2010. CHI is also planning to introduce India's first all-suite hotel,

l

Financial services giant Morgan Stanley is close to

Clarion Ludhiana, in Ludhiana, Punjab by the end

picking up a 15-20% stake in the Institute of

of 2008. The 120-suite Clarion Ludhiana Hotel aims

Human Health Research Hospitality, owners of the

to target non-resident Indians (NRI). In addition,

Ananda and Ista brands of spas and hotels, for

CHI has also linked up with Royal Indian Raj

INR1.4 to 1.6 billion. Morgan Stanley will have a

International Corporation which is expected to invest

seat on the board of the hospitality company which

approximately INR160 billion from 2008 to 2012 to

is in the process of expanding its footprint in Delhi,

develop 15,000 budget guestrooms across India

Hyderabad, Pune and Ahmedabad. It plans to have

under CHI's hotel brands such as Clarion, Comfort

nine properties operating under the Ista brand over

Inn, Quality Inn and Sleep Inn.

the next three years.

9

Jones Lang LaSalle Hotels

Digest 2008: India

l

India's real estate fund, Yatra Capital, has entered

l

ITC has announced that through its subsidiary,

into a joint venture with Atlas Hospitality Company

Fortune Park Hotels Limited, that plans are

Private Limited (AHPL), a subsidiary of Ruia Group,

underway to add 100 hotels in rural India to

to develop a luxury hotel and serviced apartments

leverage the growing corporate demand as well

in Pune. Yatra is expected to hold a 20% stake in

as reach out to approximately 792 million (72%

the INR286.4-billion venture, which also marks its

of the 1.1 billion population) people living in the

entry into India's hospitality industry. Scheduled to

rural areas. Fortune Park Hotels is expected to

be completed in late 2009, the 26,900 square metre

expand hotels and inns with as few as 20 rooms

project is likely to comprise 319 hotel rooms and 96

each in the smaller towns of India by 2012, adding

serviced apartments. The project is expected to

3,000 rooms under its brand.

cater to business travellers in the area. l l

Indian real estate developer DLF will open a Four

Rakeen India Operations Company (Rakindo) has

Seasons Hotel in Gurgaon at a cost of INR5.9

announced the signing of a Memorandum of

billion. Part of DLF's ambition to become India's

Understanding (MoU) with Lotus Hotel Investment

largest hotel group, the 250-room hotel will be

Fund (Lotus) to develop business hotels in Asia,

developed on a 10-acre site at DLF Golf Link and

particularly in India. According to the MoU, a joint

is expected to open before the Commonwealth

venture company will be formed to invest in three-

Games in 2010. The developer has also secured

star and four-star hotels in Asia, with six major cities

links with Hilton Hotels to construct over 25,000

in South India being the initial focus.

hotel rooms on 40 parcels of land in 71 cities in the country by 2010. The cities include Delhi, Mumbai,

l

Real estate developer, Royal Palms India (RPI),

Chennai, Kolkata, Bangalore, Hyderabad, Pune,

has announced its plans to invest INR15.3 billion

Chhattisgarh, Amritsar and Ludhiana.

in the next three years to develop a 8-million square feet development in suburban Goregaon. The development is expected to comprise three-star to five-star hotels, IT offices, residences, villas and a retail mall.

10

Jones Lang LaSalle Hotels

Digest 2008: Bangalore

BANGALORE

MARKET OUTLOOK

l

More than 6,400 rooms are expected to come on stream in the next couple of years, with

Prospects for Bangalore's tourism and hotel industry

international branded hotel offerings from the likes

remain positive over the next few years in view of the

of The Ritz-Carlton, Shangri-La and JW Marriott.

following main factors: l l

We expect business travel to be the prime contributor

Bangalore is a key market for hospitality in India

for room demand in the coming years on account

and will continue as such in the coming years. It is

of increased IT/ITeS activity.

still the preferred destination for the IT/ITeS industry and with the new international airport and other

l

In view of the substantial planned room additions,

infrastructure improvements, its appeal is expected

we expect occupancies to dip as evident from

to increase further.

the trend in 2007. We forecast occupancies to stabilise at around 65-70% in the next five years with ADR averaging at INR16,000.

City Snapshot (as at 2007) Bangalore

Total Land Area (square kilometres) 741 Resident Population (million)

5.6 (2001 census)

Major Industries

IT/ITeS, Telecom, Aerospace & Defence

Source: Census of India 2001, City Municipal Website, Jones Lang LaSalle Hotels

11

Jones Lang LaSalle Hotels

Digest 2008: Bangalore

includes the building of new elevated highways,

TOURISM MARKET OVERVIEW

widening of existing roads and setting up of a mass transit system in the city.

Bangalore, the capital city of the southern state of Karnataka, and one of the top five largest cities in India in terms of population, is widely recognised as the

l

Given its strategic location as a key gateway,

country's IT and outsourcing hub. The city therefore

particularly for domestic tourists, to the World

receives a higher number of business travellers than

Heritage sites of Hampi and Pattadakal and historical

leisure tourists, both from the international as well as

attractions such as Tipu Sultan's 18th century fort

domestic markets.

and palace, Bangalore is in a good position to further expand its leisure tourism segment.

The city's tourism industry is poised for further growth, supported by progressive improvements made to the

l

Bangalore is also able to offer visitors some of

tourism infrastructure as well as the continued growth

India's best-rated golf courses at the Bangalore

in inbound arrivals. Major initiatives such as the

Golf Club and Karnataka Golf Association (KGA)

opening of the new Bengaluru International Airport in

Golf Course as well as dedicated resorts such as

Devanahalli in May 2008, the construction of a metro

Eagleton on the Bangalore-Mysore highway.

rail and the Bangalore-Mysore Infrastructure Corridor will improve accessibility and also help to relieve the

l

existing strain on the city's transport system.

Improvements to the air transport infrastructure with the new international airport and expansion of the city's international air network will improve accessibility and facilitate the growth in

Key Trends and Demand Drivers

international arrivals. l

Bangalore is positioned as India's IT/outsourcing hub. The Whitefield suburb of Bangalore, located

l

Bangalore is aiming to become a healthcare hub

16 kilometres east of the city, is the IT and

by 2011, with heavy investments by the Manipal

software centre of Bangalore and home to many

Group, Wockhardt and Columbia Asia to increase

multinational companies.

the number of hospital beds in the city. State-ofthe-art facilities and specialty treatments offered

l

The state government has launched various

by these private hospitals are targeted at both

initiatives to develop Bangalore into India's Silicon

discerning domestic patients as well as international

Valley by inviting foreign investors to become

medical tourists. Bangalore is also home to renowned

involved in various private-public partnership

medical clinics such as Jindal's health farm for

infrastructure projects. The development plan

visitors looking for less intrusive alternatives.

Key Tourism Data International Tourism Total International Tourist Arrivals (million)

FY2006-07

Change over FY2005-06 (%)

1.3

+46.2

6.9

+43.2

Domestic Tourism Total Domestic Tourist Arrivals (million) Source: Ministry of Tourism, Airport Authority of India (AAI)

12

Jones Lang LaSalle Hotels

Digest 2008: Bangalore

l

International Visitor Arrivals

The MICE segment has the potential to grow provided plans for the proposed International Convention Centre adjacent to the new international

l

According to statistics from the Airport Authority of

airport materialise. The development is expected

India (AAI), international passenger traffic at

to fill the demand for full-scale exhibition and

Bangalore International Airport (BIA) increased

conference facilities that are currently lacking in the

steadily from 0.2 million in FY2001-02 to 1.3 million

city and compete directly with Hyderabad.

in FY2006-07. Compared with FY2005-06, arrivals had surged by over 46%. This uptrend is expected

l

The booming commercial and IT sectors,

to continue into FY2007-08 as indicated by the 31%

improved direct air connectivity as well as heightened

year-on-year increase in international arrivals to

investor interest contributed to the buoyant

one million during the April to November 2007 period.

state of the international visitor arrivals. While the leisure segment has potential to grow, the business segment continues to dominate.

1.4

80

1.2

70 60

1.0

50

0.8

40

0.6

30

0.4

20

0.2 0.0

Annual Growth (%)

Number of Passengers (million)

International Passenger Traffic via Bangalore International Airport

10 2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

0

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

13

Jones Lang LaSalle Hotels

Digest 2008: Bangalore

Domestic Tourism

year-on-year increase in domestic passengers at the airport during the first eight months of the financial

l

year to 5.6 million.

AAI statistics show that domestic passenger traffic has more than tripled from 2.1 million in FY200102 to 6.9 million in FY2006-07. On an annual

l

The outlook for domestic tourism is positive with

comparison basis, domestic arrivals recorded an

arrivals expected to increase due to demand from

impressive growth of 43.2%.

corporate travellers. The incoming traffic has been further fuelled by the increased frequency of existing

l

Similar to the trend for international arrivals, the

routes or introduction of additional routes by LCCs

domestic market is expected to register strong

such as Indigo, Spice Air and Go Air.

growth in FY2007-08, as indicated by the 33.5%

8

50

7

40

6

30

5

20

4

10

3

0

2

-10

1 0

Annual Growth (%)

Number of Passengers (million)

Domestic Passenger Traffic via Bangalore International Airport

2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

-20

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

14

Jones Lang LaSalle Hotels

Digest 2008: Bangalore

HOTEL MARKET OVERVIEW

Future Supply

According to our research, Bangalore has 20-25

l

Based on our research, Bangalore will witness

government-approved hotels with a total count of

the entry of more than 6,400 rooms between

2,600-2,900 rooms. Geographically, there is no

2008 and 2010.

distinct hotel district in Bangalore and the greater part of the major hotel accommodation is located

l

The new projects in the pipeline, which comprise

in the CBD along Race Course Road, MG Road

a mixture of domestic and international brand

and Sankey Road.

names, will diversify the city's accommodation offerings ranging from the internationally branded

With the new international airport, hotels such as

hotel segment such as The Ritz-Carlton,

the Windsor Manor, Le Meridien, Grand Ashok and

Sheraton, Shangri-La and JW Marriott, to budget

Taj West End, which are located along Sankey and

and economy establishments such as Ibis.

Race Course Road, will benefit from a direct road link from the airport to their properties. Currently,

l

A number of additions to supply are to be located

these properties have a perceived disadvantaged

near the new airport although construction has

location relative to the existing airport as

yet to commence. We understand from our

accessibility is often via the congested CBD area.

research that a substantial amount of land on both sides of the roads leading to the airport has

For 2007 we are only aware of the addition of The

been land-banked by developers and local hotel

Leela Palace Kempinski's 105-room extension

companies such as Taj and Oberoi were awaiting

which entered the market in January. The additional

the development of the airport.

rooms have placed some downward pressure on market-wide occupancies during the year.

Major Future Supply in Bangalore (as at March 2008) 3.5

Number of Rooms (’000)

3.0 2.5 2.0 1.5 1.0 0.5 0

2007

2008

2009

2010 onwards

Estimated Year of Completion Completed Supply

Forecast Supply

Source: Jones Lang LaSalle Hotels, Industry Sources

15

Jones Lang LaSalle Hotels

Digest 2008: Bangalore

The following table details the major supply in the pipeline from 2008 through to 2010.

Major Future Hotel Supply In Bangalore (as at March 2008) Project Name

Location

Rooms Due/Open Likely Star Positioning

Taj ITPL Bangalore

International Tech Park

199 2008

Five-star Deluxe

JW Marriott

UB City, City Centre

250 2008

Five-star Deluxe

Trident

Bengaluru International Airport

321 2008

Five-star

Shangri-La

CBD

350 2008

Five-star Deluxe

Shangri-La Resort & Spa

IT Corridor

474 2008

Five-star Deluxe

Traders Hotel

Whitefield

280 2008

N/A

Bell Tower Hotel

Whitefield

100 2008

N/A

Keys Hotel Hosur Road

Hosur Road

180 2008

Three-star

Keys Hotel

Whitefield

150 2008

Three-star

Hilton Bangalore

Ulsoor District

300 2008

Five-star Deluxe

Unnamed Hotel (by Chancery Group) Devanhalli

250 2009

N/A

Renaissance

Race Course Road

328 2009

Five-star

Sheraton Bangalore Hotel at Brigade Gateway

Malleshwaram West

300 2009

Five-star

Taj Residency (by Naveen Hotels)

Yeshwantpur

350 2009

Five-star

The Westin Bangalore

Outer Ring Road, Hebbel

300 2009

Five-star Deluxe

Lemon Tree Hotel

St. John Road

173 2009

Three-star

ITC Gardenia

Residency Road

230 2009

Five-star Deluxe

Ibis Bangalore

TBC

380 2009

Three-star

Novotel Bangalore

TBC

200 2009

Three-star

Park Plaza Bangalore

Outer Ring Road

167 2009

Four-star

Mövenpick Bangalore

TBC

220 2009

Three-star

The Ritz-Carlton

Off Residency Road

275 2009

Five-star Deluxe

Hampshire Hotel

TBC

TBC 2010

Four-star

Holiday Inn Bangalore International Aiport

Near Bengaluru International Airport

250 2010

Four-star

Oberoi Hotel

Overlooking Hebbel Lake

225 TBC

Five-star Deluxe

Ista Golf View

Koramangala

Unnamed Hotel (by Surraaj Hotels & Resorts)

TBC

100 TBC

N/A

Fortune Hotel Bangalore

TBC

TBC TBC

Four-star

70 TBC

Total New/Proposed Supply

Four-star

6,422

TBC: to be confirmed N/A: not avaliable Source: Jones Lang LaSalle Hotels, Media Sources

16

Jones Lang LaSalle Hotels

Digest 2008: Bangalore

Five-Star Deluxe and Five-Star Hotel Market

l

In view of the relatively large new supply anticipated in 2008 and with room demand expected to remain

l

Bangalore's five-star deluxe and five-star hotels

strong, we expect RevPAR growth to be driven by

enjoyed another robust year as demand continues

ADR growth in 2008-09. The anticipated addition

to exceed supply.

of almost 3,700 new rooms in 2008 and 2009 is expected to alleviate the current shortage in supply

l

l

ADR saw a 16% increment in 2006-07 to INR16,000.

however the resultant increase in competitive

Due to the addition of rooms in 2007, occupancy

pressures within the market could lead to some

dropped two percentage points to 74%.

rationalisation in ADR growth rates.

Led by growth in room rates, RevPAR strengthened by 13% year-on-year to a seven-year high of INR12,000.

Five-Star Deluxe and Five-Star Hotel Performance in Bangalore 18

78 76

14

74

12 10

72

8

70

6

68

4

66

2 0

Occupancy (%)

ADR/RevPAR (INR) (’000)

16

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

64

Financial Year* ADR

RevPAR

Occupancy (%)

* Beginning 1 April to 31 March Source: Jones Lang LaSalle Hotels, Industry Sources

17

Jones Lang LaSalle Hotels

Digest 2008: Chennai

CHENNAI

MARKET OUTLOOK

l

Our research shows that Chennai will see the entry of almost 3,700 rooms between 2008 and

Chennai's tourism and hotel industry prospects are

2011. The majority of this supply (2,075 rooms) is

positive in view of the following key contributors:

expected to enter the market by the end of 2009. Major brands include Hilton, Hyatt and JW Marriott,

l

Chennai, like Delhi to the north, will continue to be

which will broaden the range and lift the city's

the prime gateway to south India for both leisure

standard of accommodation.

and business tourists. l l

Regardless of the relatively large supply in the

Chennai has established itself as a preferred

pipeline, we expect robust demand drivers to

destination for the IT/ITeS industry as well as the

continue the trend of increased ADR and

auto and electronic equipment manufacturing

stabilised occupancy.

industry. With confirmed plans of the auto and electronic industry to expand and establish new

l

l

Occupancy in Chennai is forecast to remain

bases, we expect Chennai to be a favourable

stable at 73% in the next five years with ADR

market for the hospitality industry.

averaging INR10,000.

We forecast leisure and business travellers to maintain their share whereby increasing numbers will drive the growth of the city's hospitality industry.

City Snapshot (as at 2007) Chennai

Total Land Area (square kilometres) 181 Resident Population (million)

4.3 (2001 census)

Major Industries

Manufacturing (automotive & electronic), IT/ITeS, Banking & Financial Services

Source: Census of India 2001, City Municipal Website, Jones Lang LaSalle Hotels

18

Jones Lang LaSalle Hotels

Digest 2008: Chennai

TOURISM MARKET OVERVIEW

Nadu contributes almost 15%, second only to Karnataka. Chennai has popular government and

Located on the Coromandel Coast of the Bay of Bengal,

private universities that are known in India for

Chennai is the capital of the Indian state of Tamil Nadu.

engineering courses.

It is the fourth largest metropolitan city in India and one of the largest metropolitan areas in the world.

l

It is of religious importance to a large number of south Indians. Many temples of religious significance

Chennai's economy has a broad industrial base in the

are present in the state of Tamil Nadu and Chennai

automobile, technology, hardware manufacturing and

serves as a gateway to the state.

healthcare industries. The city is home to much of India's automobile industry and is one of the major hubs for the

l

IT/ITeS industry after Bangalore.

Chennai is the origin of the majority of the expatriate and NRI population. Many Indians from this part of the country migrate to the US and Gulf countries,

The city is served by an international airport and

mostly as software workers and as construction

two major ports; it is connected to the rest of the

professionals. They visit the country once every two

country by five national highways and two railway

years on average and stay about 30 days. During

terminals. Being an economic centre in south India,

this period they undertake religious and tourist

Chennai receives both domestic and international

excursions within the state.

business travellers. l

Emerging fast as a preferred destination for medical tourism, Chennai offers world-class treatments with

Key Trends and Demand Drivers

modern medicine as well as traditional Indian l

Chennai has a broad industrial base with a strong

medicine being available. Popular hospital chains

focus on the automobile and electronic industries.

such as Apollo, Max and Fortis have established

The city hosts world majors such as GM, Hyundai,

speciality hospitals that cater to patients from the

Nokia and Motorola. These companies have plans

Gulf and Southeast Asia.

to expand their facilities further and develop Chennai as a regional hub for Asia Pacific.

l

Chennai's large industrial base, booming IT/ITeS services, widespread religious importance and

l

It is one of the largest exporters of IT/ITeS

mushrooming healthcare sector renders a preferred

services in India after Bangalore. Out of India's

destination for business and leisure.

total IT/ITeS workforce, the parent state of Tamil

19

Jones Lang LaSalle Hotels

Digest 2008: Chennai

Key Tourism Data International Tourism Total International Tourist Arrivals (million)

FY2006-07

Change over FY2005-06 (%)

2.9

+11.5

6.1

+45.1

Domestic Tourism Total Domestic Tourist Arrivals (million) Source: Ministry of Tourism, AAI

International Visitor Arrivals

l

Latest available statistics from AAI indicate that this growth trend will continue into FY2007-08.

l

Statistics from AAI show international passenger

For the period from April to November 2007, total

traffic at Chennai International Airport reached 2.9

international passenger arrivals increased by

million in FY2006-07, up by 61% from 1.8 million

19% year-on-year to 2.2 million.

in FY2000-01.

International Passenger Traffic via Chennai International Airport 25 20 3

15 10

2

5 0

1

Annual Growth (%)

Number of Passengers (million)

4

-5 0

2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

-10

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

20

Jones Lang LaSalle Hotels

Digest 2008: Chennai

Domestic Tourism

l

Similar to the trend for international passenger arrivals, the number of domestic passengers rose

l

Statistics from AAI show domestic passenger traffic

27% year-on-year to 4.9 million over the April to

at Chennai International Airport reached 6.1 million

November 2007 period.

in FY2006-07, up from 2.2 million in 1999.

7

50

6

40

5

30

4

20

3

10

2

0

1

-10

0

2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

Annual Growth (%)

Number of Passengers (million)

Domestic Passenger Traffic via Chennai International Airport

-20

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

21

Jones Lang LaSalle Hotels

Digest 2008: Chennai

HOTEL MARKET OVERVIEW

Future Supply

According to our research and latest available

l

Our research shows that Chennai will witness

statistics, Chennai has 55 government-approved

the entry of almost 3,700 rooms between 2008

hotels with a total of 5,500 rooms. Most of the hotels

and 2011.

in Chennai are concentrated near to the CBD or along Anna Salai road that connects the international

l

The Hilton is expected to start operations in 2008

airport to the city. However, many new hotels are

while both Hyatt and JW Marriott hotels are

expected to come up along the Old Mahabalipuram

scheduled to be operational by 2009.

Road (OMR) which is fast emerging as a micro market for IT/ITeS activity. We are aware of only two

l

There is a major concentration of hotels along

openings for 2007, the Asiana at OMR Road with

the OMR and the rest are scattered around

114 rooms and The Pride at Poonamallee High

the CBD.

Road with 115 rooms. Both properties are in the five-star category.

Major Future Supply in Chennai (as at March 2008)

Number of Rooms (’000)

2.5 2.0 1.5 1.0 0.5 0

2007

2008

2009

Estimated Year of Completion Completed Supply

Forecast Supply

Source: Jones Lang LaSalle Hotels, Industry Sources

22

Jones Lang LaSalle Hotels

Digest 2008: Chennai

The following table details the major supply in the pipeline from 2008 to 2011.

Major Future Hotel Supply In Chennai (as at March 2008) Project Name

Location

Rooms Due/Open

Taj GVK Chennai

Mount Road

221 2008

Five-star

Lemon Tree Hotel

Opposite Raj Bhavan

110 2008

Three-star

Hilton Chennai

Guindy

253 2008

Five-star Deluxe

Unnamed Hotel

Old Mahabalipuram Road

300 2008

TBC

100 2008

TBC

66 2008

TBC

Unnamed Hotel (by Femena Hotels) TBC

Likely Star Positioning

Deccan Park Ltd

Old Mahabalipuram Road

Hyatt Regency Chennai

TBC

225 2009

Five-star

The ITC Grand Chola

Mount Road

550 2009

Five-star Deluxe

Hyatt

Close to the Chennai Airport

250 2009

Five-star

JW Marriott

Estuary near the Adyar river

300 2009

Five-star Deluxe

The Leela Palace Kempinski

Adyar Beach

380 2010

Five-star Deluxe

Hampshire Hotels

TBC

TBC 2011

Four-star

Unnamed Hotel (by Bharat Hotels)

TBC

320 TBC

Five-star Deluxe

Raintree-branded Hotel (by Ceebros)

Anna Salai

200 TBC

TBC

Unnamed Hotel

Off College Road

150 TBC

TBC

Fortune

Old Mahabalipuram Road

Empee Group

Inner Ring Road

Total New/Proposed Supply

Three-star 253

TBC

3,678

TBC: to be confirmed N/A: not avaliable Source: Jones Lang LaSalle Hotels, Media Sources

23

Jones Lang LaSalle Hotels

Digest 2008: Chennai

Five-Star Deluxe and Five-Star Hotel Market

increased from INR4,000 to INR8,500. Increased business travel and the lack of hotel rooms are

l

the prime reasons for this trend.

Chennai has approximately 1,500 rooms in the five-star deluxe and five-star hotel market segment. No new addition to the stock has taken place in the

l

past couple of years.

Taking into account the future supply in this segment, we anticipate downward pressure on the RevPAR.

l

Occupancies in this segment increased from 51% in 2002 to 76% in 2007. For the same period, ADR

9

90

8

80

7

70

6

60

5

50

4

40

3

30

2

20

1

10

0

2001-02 ADR

2002-03 RevPAR

2003-04 2004-05 Financial Year*

2005-06

2006-07

Occupancy (%)

ADR/RevPAR (INR) (’000)

Five-Star Deluxe and Five-Star Hotel Performance in Chennai

0

Occupancy (%)

* Beginning 1 April to 31 March Source: Jones Lang LaSalle Hotels, Industry Sources

24

Jones Lang LaSalle Hotels

Digest 2008: Delhi

DELHI

MARKET OUTLOOK

l

The Commonwealth Games in 2010 is expected to attract 50,000 foreign visitors to Delhi. Our research

Delhi is both the nation's capital and its prime economic

indicates that approximately 30,000 rooms will be

hub. It is home to the administration, Supreme Court

required to accommodate these visitors.

and political base which governs and exercises supervisory powers over the whole country. With

l

Gurgaon, the satellite city of Delhi, is witnessing

decentralisation policies for urban development of the

a phenomenal increase in development activity

National Capital Region (NCR), Delhi comprises the

with a major increase in MNCs (multinational

National Capital Territory of Delhi itself and the

corporations) and domestic BPOs (business

neighbouring satellite urban areas including Gurgaon

process outsourcings) setting up their offices

and Faridabad in Haryana and Noida, Greater Noida

there. There are about 4,087 rooms in the pipeline

and Ghaziabad in Uttar Pradesh.

in Gurgaon which will make it an alternative to Delhi city's existing commercial districts.

Further growth and development in Delhi's tourism and hospitality sectors is expected to be supported by the

l

following key factors:

With the influx of specialty hospitals such as Apollo, Fortis, Artemis Health Institute and Wockhardt Hospitals, it is expected that medical tourism will

l

Delhi will continue to be the prime gateway to India

increase and this will further strengthen the demand

for both leisure and business travellers. With

for hotel rooms.

emerging suburbs as centres of corporate activity, coupled with Delhi's positioning as the seat of the

l

Notwithstanding the large volumes of new rooms

central government, and the expanding international

expected in the future, we forecast robust demand

airport, the city's tourism industry is expected to

drivers to continue the trend of increased ADRs and

grow further in the coming years. We expect

stabilised occupancies. Occupancy in Delhi is

increasing leisure and business travellers to be a

expected to remain at 75% in the next five years

prime demand driver for the hospitality industry in

with ADR averaging at INR17,000.

the city.

25

Jones Lang LaSalle Hotels

Digest 2008: Delhi

City Snapshot (as at 2007) Delhi

Total Land Area (square kilometres) 1483 Resident Population (million)

13.8 (2001 census)

Major Industries

IT/ITeS, Manufacturing, Banking & Financial Services

Source: Census of India 2001, City Municipal Website, Jones Lang LaSalle Hotels

TOURISM MARKET OVERVIEW

international convention centre at Dwarka, located five kilometres from the international airport. This

As the capital city and one of the key international

centre is designed to have a seating capacity of

gateways to India, Delhi benefits from India's continued

12,000 with a convention hall, auditoriums,

economic expansion, rising foreign investment inflows

conference rooms, banquet halls and exhibition

and increasing attractiveness as a tourist destination.

areas, along with two hotels with up to 850 rooms. It is expected to attract large conventions to Delhi

Delhi's tourism industry stands to benefit from India's

and boost the city's MICE (meetings, incentives,

continued economic boom and the resulting influx of

conventions and exhibitions) capabilities.

foreign investment and visitors to the capital city. Playing host to the upcoming Commonwealth Games will not

l

A hospitality district is being developed by Delhi

only help the city to raise its profile as a business and

International Airport Limited (DIAL) with over

leisure destination in the international arena but will also

40 acres of land allocated for luxury and business

spur improvements to the existing tourism and transport

hotels, serviced apartments and a convention

infrastructure, thereby benefiting the tourism and

centre. The district, which is alongside the

hospitality sector.

Delhi-Gurgaon road, is expected to help ease the shortage of hotel rooms in the capital and transform the complex into a hub for hospitality,

Key Trends and Demand Drivers

commercial and retail space. l

Delhi is the second largest metropolis in India and, along with Mumbai, attracts the majority of tourist

l

Delhi is expected to see an increase in connectivity

arrivals to the country. As India's long-term capital,

in both domestic as well as international air routes.

Delhi's culture is strongly embedded in its history,

Apart from national carriers, private carriers are

and reflected in the 175 monuments that have been

also securing direct or single leg international

marked as national heritage sites. This results in a

connections from Delhi to major cities worldwide.

steady stream of visitors to the metropolis keen to

The entrance of many LCCs has boosted traffic to

witness the remnants of its Mughal past in the many

and from the capital, stretching the current aviation

bazaars and historical sites around the city.

infrastructure even further. DIAL currently handles 23 million passengers a year against its official

l

capacity of 14 million.

The Delhi Development Authority (DDA) has put forward a proposal to set up India's largest

26

Jones Lang LaSalle Hotels

Digest 2008: Delhi

l

In an effort to increase mobility within the city,

and the city centre. The scheme is expected to

plans are being put in place to expand the metro

greatly reduce journey time to the city centre.

system in time for the Commonwealth Games. The

This is to be further enhanced by the introduction

second phase of the metro system includes an

of high capacity bus systems which are already

extension into the city's southern neighbourhoods

being developed.

as well as a high-speed rail link between the airport

Key Tourism Data International Tourism Total International Tourist Arrivals (million)

FY2006-07

Change over FY2005-06 (%)

6.7

+15.4

13.6

+31.7

Domestic Tourism Total Domestic Tourist Arrivals (million) Source: Ministry of Tourism, AAI

27

Jones Lang LaSalle Hotels

Digest 2008: Delhi

International Visitor Arrivals

l

Of all the foreign tourists coming to India, 35-40% make Delhi their first port of call, with 62% of these

l

being business travellers.

Statistics from AAI show international passenger traffic at Indira Ghandi International Airport reached 6.7 million in FY2006-07, up 15.4% from the

l

Industry estimates suggest that all business

previous financial year. This growth in inbound

travellers and 12% of foreign leisure travellers

foreign travellers is expected to continue into

coming to Delhi prefer to stay in star-rated hotels.

FY2007-08 as indicated by the 11% year-on-year growth in international passenger arrivals to 4.5

l

According to our estimates, Delhi is expected to host 50,000 additional foreign tourists during

million for the April to November 2007 period.

Commonwealth Games in 2010.

7

20

6

15

5

10

4

5

3 0

2

-5

1 0

Annual Growth (%)

Number of Passengers (million)

International Passenger Traffic via Indira Ghandi International Airport

2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

-10

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

28

Jones Lang LaSalle Hotels

Digest 2008: Delhi

Domestic Tourism

l

Domestic tourists to Delhi comprise 60-65% of total arrivals with 50% preferring to stay in

l

star-rated hotels.

Based on data from AAI, domestic passenger traffic at Indira Ghandi International Airport has surged by 31.7% from 10.5 million in FY2005-06 to 13.6

l

Anecdotal evidence suggests domestic guests typically stayed for two to three days.

million in FY2006-07. A similar growth trend is expected for FY2007-08 as the first eight months of 2008 witnessed an increment of 26% year-on-

l

The outlook for domestic tourism is positive, with domestic visitor traffic expected to surge during the

year to 8.6 million domestic passengers.

Commonwealth Games.

16

40

14

35 30

12

25

10

20

8

15

6

10 5

4

0

2 0

Annual Growth (%)

Number of Passengers (million)

Domestic Passenger Traffic via Indira Ghandi International Airport

-5 2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

-10

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

29

Jones Lang LaSalle Hotels

Digest 2008: Delhi

HOTEL MARKET OVERVIEW

Future Supply

Existing Supply

l

Our research shows that Delhi/NCR will see the entry of almost 7,400 rooms between 2008 and

According to our research and the latest available

2010. The majority of supply (3,037 rooms) is

statistics, Delhi has 48 government-approved hotels

expected to enter the market in 2009.

with a total of 7,165 rooms. If we include Noida and Gurgaon (the suburbs of Delhi in neighbouring states),

l

Aside from the Crowne Plaza Gurgaon (234 rooms)

there are 62 hotels with 7,781 rooms. The majority of

which recently opened and The Westin Resort &

Delhi's upmarket hotels are located in its traditional

Spa (97 rooms), other prominent additions will

business districts of Connaught Place, Nehru Place and

include the 322-room Leela Kempinski Gurgaon

Bhikaji Cama Place however the emergence of Gurgaon

which is scheduled to open end 2008.

and Noida as major commercial and residential centres on the outskirts of Delhi has also led to increased hotel

l

Approximately 55% of the total room inventory in the pipeline will open in Gurgaon. The concentration

development activity in these areas.

of hotels parallels the commercial, residential and Our statistics indicate that of the 30,000 approximately

retail activities taking place. Some of the proposed

rooms required in the NCR region for the Commonwealth

hotel additions in the area include the Courtyard by

Games, there are presently approximately only 10,500

Marriott, Novotel and The Westin, Gurgaon.

rooms. With the expected forecast for the number of hotels coming up, it is still expected that an additional

l

While the increase in supply will help to address

15,000 to 18,000 rooms will be required during the

the current shortfall of hotel rooms in the city, new

Games. This potential demand-supply gap presents

challenges such as manpower shortages will need

huge untapped opportunity for potential investors in

to be addressed following the surge in supply.

the industry.

Major Future Supply in Delhi/NCR (as at March 2008) 3.5

Number of Rooms (’000)

3.0 2.5 2.0 1.5 1.0 0.5 0

2007

2008

2009

2010 onwards

Estimated Year of Completion Completed Supply

Forecast Supply

Source: Jones Lang LaSalle Hotels, Industry Sources

30

Jones Lang LaSalle Hotels

Digest 2008: Delhi

l

New projects in the pipeline, which comprise a

ranging from the upper tier hotel segment such as

mixture of domestic and international brand names,

the Leela Kempinski to lower tier establishments

will diversify the city's accommodation offerings

such as Ibis and Lemon Tree.

The following table details the major supply in the pipeline from 2008 to 2010.

Major Future Hotel Supply In Delhi (as at March 2008) Project Name

Location

The Leela Kempinski Gurgaon

Gurgaon

322 2008

Five-star Deluxe

The Leela Residences

Gurgaon

90 2008

Five-star Deluxe

The Aman, Lodhi Road

Delhi

69 2008

Five-star Deluxe

The Claridges Atrium Suraj Kund

Faridabad

275 2008

Five-star

Park Plaza Extension & Convention Centre

Gurgaon

32 2008

Five-star

DLF Hilton Garden Inn, Saket

Delhi

118 2008

Five-star

Park Plaza Noida

Noida

88 2008

Five-star

Courtyard by Marriott

Gurgaon

199 2008

Five-star

Picadilly, Janakpuri

Delhi

240 2008

Five-star

Courtyard by Marriott

Noida

250 2008

Five-star

Ibis

Gurgaon

217 2008

Three-star

Red Fox Manesar

Gurgaon

110 2008

Three-star

Red Fox Jasola

Delhi

77 2008

Three-star

The Westin Gurgaon

Gurgaon

300 2009

Five-star Deluxe

The Westin Service Residences

Gurgaon

150 2009

Five-star Deluxe

Regent Gurgaon

Gurgaon

300 2009

Five-star Deluxe

Today Hotel

Delhi

250 2009

Five-star

Radisson Manesar

Gurgaon

225 2009

Five-star

Crowne Plaza Today

Delhi

200 2009

Five-star

Clarion Hotel

Gurgaon

80 2009

Five-star

Unnamed hotel by Narsi group

Gurgaon

250 2009

Five-star

Savoy Suites - Apartments

Gurgaon

110 2009

Four-star

Dawnay Day

Gurgaon

100 2009

Four-star

Oakwood Apartments

Gurgaon

64 2009

Four-star

Mariott Executive Apartments

Gurgaon

173 2009

Four-star

JMD Hotel on Sonha Road

Gurgaon

175 2009

Four-star

Shipra Hotel Ghaziabad

Ghaziabad

250 2009

Three-star

Novotel

Gurgaon

320 2009

Three-star

Formula 1, Gurgaon

Gurgaon

90 2009

Three-star

31

Rooms Due/Open

Likely Star Positioning

Jones Lang LaSalle Hotels

Digest 2008: Delhi

Major Future Hotel Supply In Delhi (as at March 2008) Project Name

Location

The Leela Palace New Delhi

Delhi

210 2010

Five-star Deluxe

The Oberoi

Gurgaon

150 2010

Five-star Deluxe

Four Seasons Hotel Gurgaon

Gurgaon

230 2010

Five-star Deluxe

Hilton Dwarka New Delhi

Delhi

300 2010

Five-star

Eros Boulevard Hotel

Delhi

350 2010

Five-star

JP Greens

Greater Noida

200 2010

Five-star

Taj Business Hotel

Gurgaon

200 2010

Five-star

DLF Rajiv Chawk - Connaught Place Hotel

Gurgaon

200 2010

Five-star

Hilton Garden Inn New Delhi

Delhi

400 2010

Four-star

Six Senses

Greater Noida

TBC 2010

Five-star Deluxe

Total Proposed Supply

Rooms Due/Open

Likely Star Positioning

7,364

TBC: to be confirmed Source: Jones Lang LaSalle Hotels, Media Sources

32

Jones Lang LaSalle Hotels

Digest 2008: Delhi

Five-Star Deluxe and Five-Star Hotel Market

l

In comparison, occupancy rates remained stable at 75% but are expected to decline in the coming

l

The performance of five-star deluxe and

years on account of upcoming supply in Noida

five-star hotels in Delhi/NCR reached record

and Gurgaon.

levels in 2007 on the back of robust demand and limited supply.

l

With room demand anticipated to stay strong, we expect RevPAR growth to remain driven by ADR

l

ADR rose to historic highs at INR12,500 though

growth in 2008. However, the growth in ADR may

the additional supply coming online could affect

moderate slightly following the anticipated entry

its growth.

of over 3,400 new rooms in 2008 and 2009.

14

80

12

70

10

60 50

8

40

6

30

4

20

2 0

ADR

Occupancy (%)

ADR/RevPAR (INR) (’000)

Five-Star Deluxe and Five-Star Hotel Performance in Delhi/NCR

10 2001-02

2002-03 RevPAR

2003-04 2004-05 Financial Year*

2005-06

2006-07

0

Occupancy (%)

* Beginning 1 April to 31 March Source: Jones Lang LaSalle Hotels, Industry Sources

33

Jones Lang LaSalle Hotels

Digest 2008: Hyderabad

HYDERABAD

MARKET OUTLOOK

l

Our research shows that Hyderabad will see the entry of around 5,600 rooms between 2008 and

Hyderabad's tourism and hotel industry has the

2011. About 1,700 rooms are expected to come

potential to develop and grow further in light of the

on stream in 2008 including major brands such as

following key factors:

Marriott and Westin.

l

Hyderabad is a key market for hospitality in India

l

We expect business travel to continue to be the

and will remain so in the coming years. It has

prime demand driver in the coming years on account

established itself as a preferred destination for the

of increased IT/ITeS activity.

IT/ITeS industry after Bangalore and with the new international airport and other infrastructure

l

With the expected room additions, we forecast

improvements, its attractiveness is expected to

occupancies to dip in the coming years. We estimate

increase further.

that occupancies will stabilise at around 65-70% in the next five years with ADR averaging INR15,000.

City Snapshot (as at 2007) Hyderabad

Total Land Area (square kilometres) 625 Resident Population (million)

3.8 (2001 census)

Major Industries

IT/ITeS, Biotechnology

Source: Census of India 2001, City Municipal Website, Jones Lang LaSalle Hotels

34

Jones Lang LaSalle Hotels

Digest 2008: Hyderabad

TOURISM MARKET OVERVIEW

metre facility with a 287-room capacity business hotel, Novotel Hyderabad, the convention centre

Hyderabad is the capital city of the Indian state of

has a seating capacity of 4,000 and can be

Andhra Pradesh. It has an estimated metropolitan

configured to accommodate a seating capacity

population of 6.1 million, making it a mini-metro

of about 6,500 guests.

city and India's sixth largest metropolitan area. The city is renowned for its rich history, culture and

l

The city is an emerging base for semiconductor

architecture representing its unique character as a

fabrication activity. With the opening up of India's

meeting point for north and south India as well as its

semiconductor policy, large manufacturing

multilingual culture.

companies such as Intel and Cypress have shortlisted the city to set up their first fabrication

Also known as The City of Nizams, Hyderabad is today

plants in India.

one of the most developed cities in the country and a modern hub for IT/ITeS and biotechnology.

l

The presence of multiple speciality hospitals has established Hyderabad as a preferred destination

Hyderabad is predominantly a business destination

for medical tourism. Hospital operators including

and derives 98% of tourism revenues from business

Apollo, Max and Fortis have established hospitals

travel. Domestic business travel constitutes 70% of

which cater to domestic as well as international

total revenues.

patients, particularly from the Middle East and Asia Pacific.

Key Trends and Demand Drivers l l

l

Hyderabad is a strong base for local and

With its strong IT/ITeS industry and emerging

international business in precious stones, gems

biotechnology hub, Hyderabad is home to large

and jewellery. The city is a major hub for the

campuses of major international and domestic

processing and export of gems and jewellery and

IT/ITeS companies including Microsoft, Infosys,

draws a large number of international business

Wipro, Deloitte and UBS.

visitors for this purpose.

Hyderabad is a preferred MICE destination.

l

Hyderabad is the origin of a large expatriate and

The Hyderabad International Convention Centre

NRI population based mainly in the US and the Gulf

has established itself as a popular MICE venue

who travel to India for long periods every two years.

and has played host to numerous large and small events including Infocom in 2007 and is set to

l

Its strong IT/ITeS industry, emerging biotechnology

host the PATA Travel Mart in September 2008.

and established MICE segment has helped

The centre was developed by Dubai-based

the city create a niche for itself on the travel

Emaar Properties. An integrated 27,000 square

and tourism map.

35

Jones Lang LaSalle Hotels

Digest 2008: Hyderabad

Key Tourism Data International Tourism

FY2006-07

Change over FY2005-06 (%)

1.2

+21.0

4.5

+51.8

Total International Tourist Arrivals (million) Domestic Tourism Total Domestic Tourist Arrivals (million) Source: Ministry of Tourism, AAI

International Visitor Arrivals

l

Latest available statistics from the AAI show that a total of 0.9 million international passengers were

l

Statistics from AAI show international passenger

received at the airport for April to November 2007,

traffic at Hyderabad International Airport reached

representing an increase of 23% from the

1.2 million in FY2006-07, an increase of more than

corresponding period in 2006.

400% from FY2000-01.

0.9

50

0.8

45

0.7

40 35

0.6

30

0.5

25

0.4

20

0.3

15

0.2

10

0.1

5

0

2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

Annual Growth (%)

Number of Passengers (million)

International Passenger Traffic via Hyderabad International Airport

0

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

36

Jones Lang LaSalle Hotels

Digest 2008: Hyderabad

Domestic Tourism

l

According to the latest available statistics from the AAI, a total of 3.6 million domestic passengers were

l

AAI statistics show domestic passenger traffic at

received from April to November 2007, up 29%

Hyderabad International Airport reached 4.5 million

year-on-year.

in FY2006-07, an increase of more than 200% from FY2000-01.

Domestic Passenger Traffic via Hyderabad International Airport 60

5.0

50

4.0 3.5

40

3.0

30

2.5

20

2.0 1.5

10

1.0

0

0.5 0

Annual Growth (%)

Number of Passengers (million)

4.5

2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

-10

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

37

Jones Lang LaSalle Hotels

Digest 2008: Hyderabad

HOTEL MARKET OVERVIEW

l

Most of the rooms in 2008 will be in new hotels being developed by the Taj group, while Westin

According to our research and latest available statistics,

is expected to start operations with this year.

Hyderabad has 40 government-approved hotels with a total of 2,000 rooms. Given the importance of the

l

The existing Hyderabad International Convention

city in the economic landscape of India, Hyderabad has

Centre and the new Rajiv Ghandi International

a very low number of rooms compared with cities such

Airport will keep room occupancy rates high for five-

as Mumbai and Delhi. Most of the existing hotels in

star hotels in the near future.

Hyderabad are located in the CBD and upcoming micro markets for the IT/ITeS industry namely Madhapur

l

and Gacchibowli.

Despite the interest generated by mid-market and budget hotel development, more than half of the new properties are concentrated in the luxury and upper tier segment.

Future Supply l

Our research shows that Hyderabad will see the entry of about 5,600 rooms between 2008 and 2011. Most of these hotels will be located in the areas of Banjara Hills, Madhapur, Gacchibowli and Begumpet.

Major Future Supply in Hyderabad (as at March 2008) 3.5

Number of Rooms (’000)

3.0 2.5 2.0 1.5 1.0 0.5 0

2008

2009

2010 onwards

Estimated Year of Completion Forecast Supply Source: Jones Lang LaSalle Hotels, Industry Sources

38

Jones Lang LaSalle Hotels

Digest 2008: Hyderabad

The following table details the major supply in the pipeline from 2008 to 2011.

Major Future Hotel Supply In Hyderabad (as at March 2008) Project Name

Location

Rooms Due/Open

Lemon Tree Hotel

Cyberabad (HITEC City)

260 2008

Three-star

Park Hotels

Raj Bhavan Road, Somajiguda

225 2008

Four-star

Taj Falaknuma Palace

Old City

Taj-Begumpet

Begumpet

189 2008

Five-star

Penna Cements

Banjara Hills

180 2008

Three-star

Taj Residency

Banjara Hills

180 2008

Five-star

Quality Inn

Ameerpet

225 2008

Three-star

Westin

Madhapur

428 2008

Five-star

Courtyard by Marriott (former Viceroy Hotel)

Near Rajiv Gandhi International Airport

TBC 2009

TBC

The Leela Palace, Kempinski Hyderabad

Banjara Hills

225

Five-star

Lemon Tree Hotel

Jubilee Hills

200 2009

Three-star

Taj Krishna

Banjara Hills

200 2009

Five-star Deluxe

Raheja Mindspace

HITEC City

200 2009

Five-star Deluxe

Prajay Engineers Syndicated Group Adis

140 2009

Three-star

Unknown hotel

HITEC City

400 2010

Five-star Deluxe

Ibis

Shamshabad

200 2010

Three-star

Hampshire Hotel

TBC

TBC 2010

TBC

Trident

HITEC City

150 2011

Five-star

Hilton Hyderabad

Saifabad/Adarsh Nagar

299 2011

TBC

Hyatt

Banjara Hills

200 N/A

Five-star Deluxe

Green Park

Ameerpet

120 N/A

Four-star

Mantri group

HITEC City

N/A N/A

Five-star

GoAP

HITEC City

150 N/A

Three-star

ITC

HITEC City

N/A N/A

Five-star

Emaar Golf Resorts

Gacchibowli

70 N/A

Five-star Deluxe

Grand Hyatt

Manikonda

400 N/A

Five-star Deluxe

Holiday Inn

Manikonda

350 N/A

Five-star

GMR Group

Shamshabad

300 N/A

Five-star

Regal Broadway

Shamshabad

N/A N/A

Five-star

Emaar

Shamshabad

70 N/A

Hometel

HITEC City

60 2008

2009

200 N/A

Total New/Proposed Supply

Likely Star Positioning

Five-star Deluxe

Seven-star Four-star

5,621

TBC: to be confirmed N/A: not avaliable Source: Jones Lang LaSalle Hotels

39

Jones Lang LaSalle Hotels

Digest 2008: Hyderabad

Five-Star Deluxe and Five-Star Hotel Market

ADR improved from INR2,700 to INR9,500. Increased business travel and the lack of hotel

l

rooms are the prime reasons for this trend.

The five-star deluxe and five-star market segment in Hyderabad has approximately 1,300 rooms. This is expected to increase to almost 2,800 rooms by

l

Taking into account the future supply in this segment, we expect downward pressures on the

the end of 2009.

RevPAR. l

The occupancies in this segment increased from 65% in 2002 to 73% in 2007. For the same period,

10

78

9

76

8

74

7

72

6

70

5

68

4

66

3

64

2

62

1

60

0

2001-02 ADR

2002-03 RevPAR

2003-04 2004-05 Financial Year*

2005-06

2006-07

Occupancy (%)

ADR/RevPAR (INR) (’000)

Five-Star Deluxe and Five-Star Hotel Performance in Hyderabad

58

Occupancy (%)

* Beginning 1 April to 31 March Source: Jones Lang LaSalle Hotels, Industry Sources

40

Jones Lang LaSalle Hotels

Digest 2008: Mumbai

MUMBAI

MARKET OUTLOOK

l

Mumbai has also gained new international connections with direct flights from both private and

Mumbai is the financial capital of India and the base for

national carriers.

most national and international banks, funds and other financial institutions operating in the country. It serves

l

Asia's largest slum, Dharavi, is being redeveloped

as a gateway to western India and has the busiest

by private entrepreneurs in partnership with the

domestic and international airport after Delhi. Apart from

government. This is expected to release prime real

business, it is also popular among leisure tourists, both

estate of about 535 acres that will cater to the

domestic and international, as it serves as a starting

development of new commercial and residential

point for visiting popular tourist destinations in western

real estate in Mumbai.

India such as Goa and Pune. l

In addition to Dharavi's redevelopment, the Mukesh

Further growth and development in Mumbai's tourism

Ambani-promoted Reliance Industries is developing

and hospitality sectors is expected to be supported by

a Special Economic Zone in Navi Mumbai which is

the following key factors:

proposed to comprise 35,000 acres. This will further foster commercial activity in city and generate

l

demand for rooms.

With emerging suburbs as centres of corporate activity and the expansion of Mumbai towards the north and an expanding international airport,

l

Notwithstanding the large volumes of new rooms

Mumbai is expected to see growth in tourist activity

planned, we expect robust demand drivers to

in the coming years. We expect leisure and business

continue the trend of increased ADR and stabilised

travel to be a prime demand driver for the city’s

occupancies. Occupancy in Mumbai is expected to

hospitality industry.

remain stable at 75% in the next five years with ADR averaging at INR17,000.

l

Mumbai is also emerging as a popular medical tourism destination with popular hospitals such as Lilavati, Hiranandani, Hinduja and Jaslok offering speciality treatments.

41

Jones Lang LaSalle Hotels

Digest 2008: Mumbai

City Snapshot (as at 2007) Mumbai

Total Land Area (square kilometres) 4,355 Resident Population (million)

17.8 (2001 census)

Major Industries

IT/ITeS, Manufacturing, Banking & Financial Services

Source: Census of India 2001, City Municipal Website, Jones Lang LaSalle Hotels

TOURISM MARKET OVERVIEW

in the suburbs as well as Hinduja and Jaslok downtown offer state-of-the-art facilities,

Mumbai's tourism prospects are promising in the

renowned doctors and outpatient services to

immediate term. Any unfavourable impact on foreign

international patients.

arrivals arising from the country's political risk, security concerns and airport congestion is expected to be limited.

l

Improvements to the existing airport infrastructure

However, while Mumbai's medium- to longer-term tourism

will boost the airport's passenger handling

prospects remain positive, the development of the

capacity and strengthen Mumbai's positioning

supporting tourism infrastructure needs to keep pace

as a key international gateway. The Chhattrapati

with the inflow of visitors in order to ensure the sector's

Shivaji International Airport (CSIA) is currently

future sustainability and to validate Mumbai's position

the busiest airport in India, handling 22.2 million

as the commercial hub of India.

domestic and international passengers during FY2006-07 against its capacity of 14 million. Upgrading of the airport, including a new passenger

Key Trends and Demand Drivers

terminal is underway, and when completed l

Mumbai offers visitors a number of historical,

will alleviate some of the congestion. The city's

architectural, religious and cultural attractions

airport infrastructure will receive a further boost

unique to the city such as the Gateway of India,

following government approval for the construction

Haji Ali Mosque, Hanging Gardens and the

of Mumbai’s second international airport at

promenade of Marine Drive also known as the

Navi Mumbai.

"Queen's Necklace". Home to Bollywood, Mumbai also attracts a large number of visitors trying to

l

The addition of new air routes will expand

catch a glimpse of the stars. Additionally, Mumbai

Mumbai's international air network and improve

has two World Heritage sites: the Elephanta Caves

accessibility. For example, the recent liberalisation

and Chhattrapati Shivaji Station (Victoria Terminus).

of the aviation sector has led to the rise of the London-Mumbai route as one of the fastest growing

l

The city's medical tourism segment is expected

sectors with five carriers currently offering services.

to benefit from the government's recently announced

Finnair launched its Mumbai-Helsinki route in June

plans to launch a medical tourism campaign to

this year while Continental Airlines will operate

raise awareness about India's private medical

between New York and Mumbai daily from October.

services as a part of the Incredible India campaign.

EgyptAir also started tri-weekly services on the

Private hospitals such as Lilavati and Hiranandani

Mumbai-Kuala Lumpur route from June 2007.

42

Jones Lang LaSalle Hotels

Digest 2008: Mumbai

l

The Finance Ministry is committed to transforming

construction, competition is expected to intensify.

Mumbai into an international financial hub over

Certain areas, identified as micro-markets for

the next 10 years, and is aligning current urban

international luxury brands, have seen the

infrastructure and lifestyle facilities with global

development of speciality malls. These developments

standards. The state government has launched

will broaden the city's offering and attract both

a number of projects to reduce pressure on

international and domestic visitors.

existing infrastructure. These include drainage system upgrades, road widening and privatisation

l

Realising the acute land shortage situation in

of airports and development of metro train services

south Mumbai, MMRDA started developing

in addition to the construction of 42 new flyovers

a series of new growth centres in Greater

across the city. This long term traffic scheme by

Mumbai to help ease the pressure on offices

the Mumbai Metropolitan Region Development

and commercial activities in south Mumbai. The

Authority (MMRDA) includes expressways as well

Bandra Kurla Complex (BKC) is being developed

as arterial routes in presently traffic-congested areas

as an alternative location where future growth

such as Andheri-Ghatkopar Link Road, S V Road

of offices and commercial activity can be

and L B S Marg.

absorbed and where some of the existing activities from south Mumbai can be relocated. The British

l

Several hotel projects are now being considered in

Deputy High Commission's recent purchase

locations along the Mumbai metro lines. The first

of office space and the construction of the

phase of the 11-kilometre Versova-Andheri-

American Consulate in the BKC are examples

Ghatkopar route of the Mumbai metro became

of the south-to-north Mumbai migration

operational in June this year. When completed in

by corporations.

2011, the metro is expected to dramatically lessen bottlenecks on these roads and reduce travelling

l

Lured by its modern infrastructure, centralised

time by half. To be built over several phases, the

location and its viability as a new commercial hub,

metro will have nine lines of which 32.5 kilometres

more commercial and diplomatic offices are

will be underground and 114 kilometres on elevated

finding the BKC appealing. With limited existing

rails. The first phase will be fully functional by 2011,

supply in the vicinity and two other known

the second phase by 2016 and the third phase

developments underway, the potential demand for

by 2021.

hotel rooms that is created by the shift in activity could exceed supply.

l

The development of the eight-lane Bandra-Worli Sealink will improve intra-city connectivity as it

l

Recent years have seen a trend towards the

will ease the congestion at Mahim Causeway

development of mixed-use projects with a hotel

which is currently the only link along the North-

component. For instance, a High Court order in

South corridor. Once this happens, the travel

late 2005 saw the opening up of 600 acres of

time from one end of the city to the other will be

mill land, of which 200 acres has been allocated

greatly reduced, thus increasing competition

to commercial space. Various bids for these

among hotels that have so far only competed

land parcels are underway for the purpose of

in their micro-markets.

mixed-use developments with a retail and hotel component. Many local landowners are in talks

l

Mumbai has the potential to develop into a key

with international hospitality brands to launch

shopping destination with a number of new malls

new properties and we expect to see more joint

opening in the city. While many are still under

ventures in the future.

43

Jones Lang LaSalle Hotels

Digest 2008: Mumbai

l

With the availability of land from the mills area,

l

Cruising is a growing lifestyle choice among affluent

we are likely to witness an increase of commercial

Indians and Mumbai is poised to become a prime

activities at locations such as Worli, Parel and

destination. The economic growth in the city, along

Lower Parel which may also attract hotel

with a new cruise shipping policy, has led to 40

developments. With the new Bandra-Worli Sealink,

international cruise lines calling on the port. We

these locations will also be more accessible.

expect to see a boost in both domestic as well as international leisure travel in future.

Key Tourism Data International Tourism Total International Tourist Arrivals (million)

FY2006-07

Change over FY2005-06 (%)

7.3

+9.2

14.9

+27.6

Domestic Tourism Total Domestic Tourist Arrivals (million) Source: Ministry of Tourism, AAI

44

Jones Lang LaSalle Hotels

Digest 2008: Mumbai

International Visitor Arrivals

l

Indicating the continued growth in international arrivals, latest available statistics for up to the third

l

Our analysis of Mumbai's international tourism

quarter of FY2007-08 showed that the number of

market is based on the international passenger

international passengers at CSIA had increased by

traffic arriving at CSIA. The ease of accessibility to

11% year-on-year to 5.1 million.

other destinations from Mumbai also reinforces the city's reputation as an international gateway to the

l

Given Mumbai's positioning as a commercial hub and logistics centre, business travel remains the

rest of the country.

key motivator for visiting Mumbai. However, the l

leisure segment has further potential for growth.

International passenger movement at Mumbai's CSIA has increased steadily from 4.9 million in FY2001-02 to 7.3 million in FY2006-07. Year-on-

l

Anecdotal evidence suggests international visitors generally stayed for two to four days.

year, international passenger traffic was up 9.2%.

International Passenger Traffic via Chhattrapati Shivaji International Airport 20

8

15

6 10

5

5

4 3

0

Annual Growth (%)

Number of Passengers (million)

7

2 -5

1 0

2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

-10

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

45

Jones Lang LaSalle Hotels

Digest 2008: Mumbai

Domestic Tourism

l

The domestic tourism market received a boost from the entrance of local airlines which made air travel

l

l

The burgeoning business sector is fuelling domestic

accessible and more affordable to the masses. For

travel growth. Reflecting the growth of Mumbai's

example, Kingfisher Airlines launched direct flights

domestic tourism market, domestic passenger traffic

in April 2007 from Mumbai to Nagpur, Indore and

at Mumbai’s Santa Cruz Domestic Airport more than

Guwahati. We expect other domestic airlines to

doubled from FY2001-02 to 14.9 million in FY2006-

follow with more connections between the

07. The annual growth in domestic passenger traffic

commercial capital and other emerging economic

was 27.6%, up from 22% last year.

centres in India.

This growth trend is expected to continue into

l

Anecdotal evidence suggests domestic visitors

FY2007-08, with latest available statistics for the

generally stayed for two to four days, similar to the

first eight months (April to November) of the financial

international segment.

year showing a 24.5% year-on-year increase in domestic air passengers to about 12 million.

16

30

14

25

12

20

10

15

8

10

6

5

4

0

2

-5

0

2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

Annual Growth (%)

Number of Passengers (million)

Domestic Passenger Traffic via Santa Cruz Domestic Airport

-10

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

46

Jones Lang LaSalle Hotels

Digest 2008: Mumbai

in these sectors. Moreover, Navi Mumbai Special

HOTEL MARKET OVERVIEW

Economic Zone (NMSEZ) will promise enhanced l

Demand for rooms will remain strong with

development and also push the demand for hotel

expectations of a continued steady increase in

accommodation in north Mumbai. The construction

arrivals, generating healthy yields across the market.

of Navi Mumbai International Airport at Kopra-Panvel

Due to the geographic layout of Mumbai, the south

is expected to increase capacity and connectivity,

offers limited opportunities for real estate

boosting the demand for hotels in Navi Mumbai.

developments. With the saturation of prime land in south Mumbai, most of the development is

Existing Supply

taking place near the commercial centres of central Mumbai and the airport vicinity of north Mumbai.

l

As at end 2007 (latest available statistics), Mumbai had 74 government-approved hotels with a total

l

Traditionally, the Mumbai hotel market has been

count of 9,503 rooms.

skewed towards the upper tier hotels, most likely the result of the high land prices in the city. Most of

l

The concentration of hotels is now in three

the upcoming projects are expected to fall within

broad localities: in south Mumbai, in the Colaba-

the five-star deluxe and five-star hotel category

Marine drive area, in north Mumbai next to the

while the mid- to lower tiers are expected to be

airports and Bandra-Kurla. Central Mumbai has

developed in the outer suburbs.

seen some development with more projects expected in the future.

l

The redevelopment of mill land area in central Mumbai into commercial will add to the supply

l

As the journey from the airport to south Mumbai

and enhance the demand in the hospitality sector.

can take as long as 90 minutes, visitors on a

Two prominent developments are the Four Seasons

short stopover typically stay at hotels near the airport

at Worli and Shangri-La, High Street Phoenix at

such as the ITC Grand Maratha Sheraton, Hyatt

Lower Parel.

Regency, Le Meridien, The Leela Kempinski and InterContinental The Grand Mumbai.

l

Proposed infrastructure projects such as the BandraWorli Sea Link, Mass Rapid Transit System (MRTS)

l

According to our research the 226-room Sahara

and Mumbai Trans Harbour Link (MTHL) between

Star in Vile Parle near the domestic airport was the

Nhava and Sheva will augment growth in hospitality

only major hotel opening in 2007.

47

Jones Lang LaSalle Hotels

Digest 2008: Mumbai

Future Supply

with Sofitel at Bandra-Kurla. Additionally, Starwood is expected to launch its 100-plus

l

Our research reveals more than 3,000 new rooms

room property under the aloft brand in 2010,

in the pipeline from 2008 to 2011. The majority of

and there will be a new 200-room Park Hyatt in

this new supply (51%) is anticipated in 2008.

2011. Searock Sheraton, which was acquired by Claridges Hotels, is being refurbished and

l

The new projects are mainly local brands, many

upgraded to a five-star deluxe hotel and is strongly

of which are brand extensions of existing properties

rumoured to be rebranded as Mandarin Oriental.

expanding to other parts of the city. For example,

The entrance of international brands will raise the

a new Taj Santacruz is coming up near the airport

city's accommodation standards.

while Hyatt International recently announced the development of a Park Hyatt on Marine Lines in

l

There is also an established but small serviced

south Mumbai, making it their third operation in

apartment market in Mumbai. Main developments

the city.

by hotel operators include the Lakeside Chalet Marriott Executive Apartments at Powai Mumbai

l

Mumbai will also see several major international

(177 units) and Grand Hyatt serviced apartments

players enter the market with flagship properties

at Santa Cruz (147 units).

such as the Four Seasons in Worli and Accor

Major Future Supply in Mumbai (as at March 2008) 1.8

Number of Rooms (’000)

1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0

2007

2008

2009

2010 onwards

Estimated Year of Completion Completed Supply

Forecast Supply

Source: Jones Lang LaSalle Hotels, Industry Sources

48

Jones Lang LaSalle Hotels

Digest 2008: Mumbai

The following table details the major supply in the pipeline from 2008 to 2011.

Major Future Hotel Supply In Mumbai (as at March 2008) Project Name

Location

Rooms

Due/Open

Likely Star Positioning

New/Proposed Hotel Projects Four Seasons Hotel Mumbai

Worli, Central Mumbai

230

2008

Five-star Deluxe

Fortune Select Exotica

Navi Mumbai

TBC

2008

Four-star

Renaissance Mumbai Hotel & Convention Centre (expansion)

Powai, Central Mumbai

291

2008

Five-star

Ibis Mumbai

Mumbai Airport

145

2008

Three-star

Taj Santacruz Mumbai

Near Santa Cruz Airport

175

2008

Five-star Deluxe

Radisson Hotel Mumbai

Powai, Central Mumbai

275

2008

Five-star

Trident

Bandra Kurla Complex

437

2008

Five-star

Sofitel Mumbai

Bandra Kurla Complex

311

2009

Five-star

Mandarin Oriental (former Searock Sheraton)

Lands End

TBC

2009

Five-star Deluxe

Crowne Plaza Juhu, Mumbai

Juhu

225

2009

Five-star Deluxe

Shangri-La Mumbai

Lower Parel, Central Mumbai

350

2009

Five-star Deluxe

Westin

Goregoan

TBC

2009

Five-star Deluxe

aloft

TBC

130

2010

Three-star

Lemon Tree Hotel

Andheri

250

2010

Three-star

Park Hyatt Mumbai

Marine Lines

200

2011

Five-star

Royal Orchid

TBC

TBC

TBC

Four-star

Total New/Proposed Supply

3,019

TBC: to be confirmed Source: Jones Lang LaSalle Hotels

49

Jones Lang LaSalle Hotels

Digest 2008: Mumbai

Five-Star Deluxe and Five-Star Hotel Market

l

Occupancy rates, however, recorded a marginal 0.8 percentage point increase to about 78.0%

l

over the same period.

Strong demand in the wake of limited supply pushed occupancy and ADR for five-star deluxe and fivestar hotels in Mumbai to a seven-year high in

l

l

With room demand anticipated to remain strong,

FY2006-07 as trading performance improved for

we expect RevPAR growth to be driven by ADR

the fourth consecutive year.

growth in 2008.

Compared with FY2005-06, ADR rose by 40.4% to about INR9,000 in FY2006-07. We anticipate downward pressure due to the additional supply in the pipeline.

10

90

9

80

8

70

7

60

6

50

5

40

4 3

30

2

20

1

10

0

ADR

2000-01

2001-02 RevPAR

2002-03

2003-04 2004-05 Financial Year*

2005-06

2006-07

Occupancy (%)

ADR/RevPAR (INR) (’000)

Five-Star Deluxe and Five-Star Hotel Performance in Mumbai

0

Occupancy (%)

* Beginning 1 April to 31 March Source: Jones Lang LaSalle Hotels, Industry Sources

50

Jones Lang LaSalle Hotels

Digest 2008: Pune

PUNE

MARKET OUTLOOK

l

Hotels from major international chains such as JW Marriott, Westin and Hyatt are set to start operations by 2010.

Pune's tourism and hotel industry has the potential to grow and develop further due to the following key factors:

l

We forecast business travel to continue as the prime demand driver in the coming years on account of

l

increased IT/ITeS activity

Pune has established itself as a preferred destination for the IT/ITeS industry and is the second most popular city in Maharashtra after Mumbai for

l

With the expected room additions we forecast

business and education. With a new international

occupancies to dip in the coming years. In our

airport and other infrastructure improvements, its

opinion, occupancies will stabilise at around

attractiveness is expected to increase further.

75-80% in the next five years with ADR averaging INR11,000.

l

Our research shows that Pune will record the entry of around 3,365 rooms between 2008 and 2010. Around 1,129 rooms of total supply are expected to come on stream in 2009.

City Snapshot (as at 2007) Pune

Total Land Area (square kilometres) 700 Resident Population (million)

2.5 (2001 census)

Major Industries

IT/ITeS, Manufacturing, Education

Source: Census of India 2001, City Municipal Website, Jones Lang LaSalle Hotels

51

Jones Lang LaSalle Hotels

Digest 2008: Pune

been present in the city and are expanding their

TOURISM MARKET OVERVIEW

existing operations. Pune is in the western Indian state of Maharashtra. Capital of Pune District and the eighth largest urban

l

An established IT/ITeS destination for major domestic and international firms, Pune has large

centre in India with a population of five million, it is

campuses and offices of both domestic and

the second largest city in the state. It is located

international IT/ITeS firms including TCS, Infosys,

approximately 150 kilometres east of Mumbai and is

Wipro, Cognizant and Kanbay.

at the eastern edge of the Western ghats on the Deccan plateau. l

The city is home to several reputed government

Pune is widely considered the cultural capital of

and private universities attended by students

Maharashtra. The city has several reputed colleges

from other parts of India and throughout Asia Pacific.

and other educational institutions and is called the

Pune University has more than 100,000 students

"Oxford of the East" (or "Oxford of India"). It has a

across a diverse range of studies from engineering

very strong presence in the automobile sector and

to medicine to management.

is on its way to consolidating its position as the "Detroit of India". It is now home to numerous software and

l

Pune will host the third Youth Commonwealth Games in October 2008. It is expected that 71

IT companies.

countries will take part in these games and the city will host more than 2,000 athletes and professionals.

Pune is predominantly a business and education destination and derives most of its tourist revenues from business travel. Compared with other prominent

l

With its proximity to Mumbai and ease of access

cities in India, air connectivity to Pune is still undeveloped

on an expressway or a 30-minute flight, Pune is

and is proving to be an inhibitor towards the growth of

easily accessible from international destinations

the city. The Defence Ministry has recently provided in-

via Mumbai. The travel time between Pune and

principle clearence for a proposed international airport

Mumbai has been greatly reduced following the

project in Pune.

opening of the Mumbai-Pune expressway and also with the advent of multiple flight options via LCCs

Key Trends and Demand Drivers l

and private airlines.

Pune is a strong automobile manufacturing base

l

As a hub for colleges and universities, and a

for major domestic and international car

strong automobile manufacturing base, Pune has

manufacturers. Auto majors such as GM, Mercedes

a lot to offer.

Benz, Tata Motors and Bajaj Auto have traditionally

52

Jones Lang LaSalle Hotels

Digest 2008: Pune

Key Tourism Data International Tourism

FY2006-07

Change over FY2005-06 (%)

6.7

+15.4

13.6

+31.7

Total International Tourist Arrivals (million) Domestic Tourism Total Domestic Tourist Arrivals (million) Source: Ministry of Tourism, AAI

International Visitor Arrivals

Domestic Tourism

There are no available statistics for international

l

Domestic passenger traffic at Pune Airport reached 1.5 million in FY2006-07, up by more than 250%

connections to and fro Pune Airport.

from FY2000-01. l

Statistics from AAI show domestic passenger traffic for the period April to November 2007 increased by 19% to reach 1.1 million compared with the same period in 2006.

Domestic Passenger Traffic via Pune International Airport 80

1.6

70 60

1.2

50

1.0

40

0.8

30 20

0.6

10

0.4

Annual Growth (%)

Number of Passengers (million)

1.4

0

0.2

-10

0

-20

2001-02

2002-03

2003-04

2004-05

2005-06

Financial Year* Number of Passengers (million)

2006-07

2006-07 (Apr-Nov)

2007-08 (Apr-Nov)

Annual Growth (%)

* Beginning 1 April to 31 March Source: AAI, Jones Lang LaSalle Hotels

53

Jones Lang LaSalle Hotels

Digest 2008: Pune

HOTEL MARKET OVERVIEW

Future Supply

According to our research and the latest available

l

Our research shows that Pune will see the entry

statistics, Pune has 36 government-approved hotels

of around 3,365 rooms between 2008 and 2010.

with a total of 1,000 rooms. Given the importance of

Most of these hotels will be located in the areas of

the city in the economic landscape of India, Pune,

Hinjiwadi and Senapati Bapat Marg.

like Hyderabad, has a very low number of rooms compared with cities such as Mumbai and Delhi.

l

Hotels from major international chains such as JW

Most of the existing hotels in Pune are located near

Marriott, Westin and Hyatt are expected to start

to the CBD.

operations by 2010.

Major Future Supply in Pune (as at March 2008) 1.6

Number of Rooms (’000)

1.4 1.2 1.0 0.8 0.6 0.4 0.2 0

2008

2009

2010 onwards

Estimated Year of Completion Forecast Supply Source: Jones Lang LaSalle Hotels, Industry Sources

54

Jones Lang LaSalle Hotels

Digest 2008: Pune

The following table details the major supply in the pipeline from 2008 to 2010.

Major Known Hotel Supply In Pune (as at March 2008) Project Name

Location

Rooms

Due/Open

Lemon Tree Hotel

City Centre

230

2008

Three-star

Ibis Pune

TBC

180

2008

Four-star

Marriott Courtyard West Pune

Hinjawadi

153

2008

Five-star

Marriott Courtyard

Sassan Road

210

2009

Five-star

The Leela Palace, Kempinski Pune

Yerwada

200

2009

Five-star Deluxe

ISTA Hotels and Spa

NA

150

2009

Four-star

JW Marriott

Airport Road

250

2009

Five-star Deluxe

The Yatra

Nagar Road

319

2009

Three-star

Pune Marriott

Senapati Bapat Road

430

2010

Five-star Deluxe

Royal Orchid

TBC

140

2010

Four-star

Hyatt Regency

Airport Road

250

TBC

Five-star

Radisson

Kharadi

156

N/A

Five-star

Peppermint

NA

90

N/A

Three-star

Westin

Koregaon Park

277

N/A

Five-star Deluxe

Novotel

Magarpatta City

330

N/A

Four-star

Total New/Proposed Supply

Likely Star Positioning

3,365

TBC: to be confirmed N/A: not avaliable Source: Jones Lang LaSalle Hotels

55

Jones Lang LaSalle Hotels

Digest 2008: Pune

Five-Star Deluxe and Five-Star Hotel Market

ADR has increased from INR3,000 to INR7,500. The growth trend can be attributed to increased

l

business travel as well as the lack of hotel rooms.

The five-star deluxe and five-star hotel market segment in Pune has approximately 530 rooms. This is expected to increase to more than 1,300

l

Taking into account the future supply in this segment, we expect the occupancies to stabilise in the near

rooms by the end of 2009.

future and settle at 75% in the next four to five years. l

Occupancies in this segment have increased from

ADR is expected to be about INR12,000, backed

70% in 2002 to 82% in 2007. For the same period

primarily by corporate demand.

8

84

7

82 80

6

78

5

76

4

74

3

72

Occupancy (%)

ADR/RevPAR (INR) (’000)

Five-Star Deluxe and Five-Star Hotel Performance in Pune

70

2

68

1

66

0

2001-02 ADR

2002-03 RevPAR

2003-04 2004-05 Financial Year*

2005-06

2006-07

64

Occupancy (%)

* Beginning 1 April to 31 March Source: Jones Lang LaSalle Hotels, Industry Sources

56

Jones Lang LaSalle Hotels

Copyright © Jones Lang LaSalle Hotels 2008

Disclaimer This report is confidential to the recipient of the report. No reference to the report or any part of it may be published in any document, statement or circular or in any communication with third parties without the prior written consent of Jones Lang LaSalle Hotels, including specifically in relation to the form and context in which it will appear. We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of making forward projections involves assumptions in respect of a considerable number of variables which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome and we draw your attention to this factor. Jones Lang LaSalle Hotels makes no representation, warranty, assurance or guarantee with respect to any material with which this report may be issued and this report should not be taken as an endorsement of or recommendation on any participation by any intending investor or any other party in any transaction whatsoever.

This report has been produced solely as a general guide and does not constitute advice. Users should not rely on this report and must make their own enquiries to verify and satisfy themselves of all aspects of information set out in the report. We have used and relied upon information from sources generally regarded as authoritative and reputable, but the information obtained from these sources may not have been independently verified by Jones Lang LaSalle Hotels. Whilst the material contained in the report has been prepared in good faith and with due care, no representation or warranty is made in relation to the accuracy, currency, completeness, suitability or otherwise of the whole or any part of the report. Jones Lang LaSalle Hotels, its officers, employees, subcontractors and agents shall not be liable (to the extent permitted by law) to any person for any loss, liability, damage or expense ("liability") arising directly or indirectly from or connected in any way with any use of or reliance on this report. If any liability is established, notwithstanding this exclusion, it shall not exceed $1,000.

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