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Chennai is seeing a surge in luxury hotels. After the launch of three international brands last year, the Taj Group is the latest to open doors of its 5th property in the city - The Gateway Hotel with over 200 rooms at an investment of about Rs 150 crore.
With this latest entrant, the city now has over 28 branded hotels - including Grand Chola, Park Sheraton, Radisson and Park Hyatt. Add to this, more high-end projects including SRM's Novotel, Holiday Inn Express in Mahindra City, Le Meridian Chennai, Lemon Tree and Park Regent, which are under construction.
The total number of rooms in the city has increased from 4,788 in 2012 to 5826 in 2013 - a 23 percent rise in the inventory. However, the influx of new hotels, combined with a fall in occupancy rates due to the slowdown is leading to a demand-supply mismatch in the city.
N Hariharan, Office Director, Cushman & Wakefield, says: "If you look at 2008-2012, we have seen close to about 3,400 keys enter the market, out of which Luxury segment contributing predominantly. Close to about 1,250 keys have entered the upper-scale luxury market."
There is a clear over supply in the market. And with the average occupancy rate on weekdays falling to 55-60% and 20-25% on weekends, some big names are either being forced to offer discounts to attract customers or take more drastic measures like changing their entire strategy.
So, given these circumstances, why are we still seeing big ticket hotel launches in Chennai? Philippe H Charraudeau, Vice President & General Manager, ITC Grand Chola, says: "Growth in the number of branded hotels which has established itself in Chennai is because the economy of Tamil Nadu is looking good. Far more investments are coming into Chennai from different sectors, be it automobile, IT, etc."
Also, hoteliers hope the rupee's depreciation will increase the number of foreign travellers and that could help occupancy rates in the near term.
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