Serviced apartments' growth on a fast track in India

Despite strong underlying demand for long-stay accommodations, the Indian serviced apartments segment has not really caught up with the demand. However, with market players starting to understand the potential of this accommodation category, supply is expected to increase significantly in the coming years.

Michael Price, country manager for Oakwood Worldwide in India, feels the serviced apartment industry has tremendous growth potential in the country. “The domestic economy is strengthening at an impressive rate and this growth will provide business development opportunities and increased consumerism. The demand for this accommodation category here is rising thanks to increasing foreign investment, business development and increased domestic spending,” said Price.

A distinct offering vis-a-vis hotels, serviced apartments are designed for long staying guests as compared to hotels that cater to short stay. While there are operators selling inventory on a daily basis as well, serviced apartments generally cater to guests with a minimum stay of a week going up to 12 months. Daily rates in a serviced apartment property ranges between Rs 6,000 to Rs 8,000 depending on the market and the monthly charges are anything between Rs 40,000 to Rs 250,000 based on the positioning of the property.

In terms of organised supply in India, industry experts estimate the current serviced apartment inventory to be just a fraction of the overall hotel room supply. While global hospitality consultant HVS International India estimates overall supply of hotel rooms (organised segment) to be a little over 110,000, there is no quantifiable data to put a number to serviced apartments inventory.

Industry experts familiar with the segment however, envisage the number of serviced apartment (organised category) units in the country to be under 2% of hotel rooms supply or between 1,500 to 2,000 units. However, taking into account the huge demand supply gap, existing players seem to be ramping up supply to gain market share.

The excitement in this accommodation category is evident from the development plans being chalked out by existing and new pure-play serviced apartment operators. While Oakwood, Ascott, Frasers have already put a development plan for India, the latest entrant is in the form of London headquartered leading international provider of serviced apartments and corporate housing BridgeStreet.

Outlining the extend of demand their company has been geting for corporate housing in India, Max Thorne, SVP – international, BridgeStreet Residences, Serviced Apartments, Suites, said that the host of MNCs (IBM, Microsoft, Honeywell,
Sapient etc) they work with demand close to 1,000 rooms every week.

“We are unable to fully meet their demands owing to lack of such facilities in India at present. As a result, we are now looking to expand our presence here. The target is to have a minimum of 1,000 units across categories in our network within the next 12-18 months from now. We will pursue management and franchise route managing properties across three-star to five-star categories in India,” he said.

As for existing player Oakwood Worldwide is concerned, it currently operates with 525 units and is looking to quadruple the inventory by 2014. “We are involved in several projects throughout India for our three brands viz. Oakwood Premier, Residence and Apartment,” said Price without divulging precise details. However, in an earlier interaction, Oakwood's then country manager for India, Praveen Nair had put the overall number to 2,000 serviced residences by 2014.

Singapore-based CapitaLand subsidiary, The Ascott Ltd is another player with an extensive development pipeline. As per Ascott website, the company has signed up six properties under its Somerset and Citadines brands across four Indian cities viz Bangalore, Ahmedabad, Hyderabad and Chennai. Scheduled to open between 2011 and 2012, Ascott is likely to add over to 1,200 serviced residences in India. In fact, industry sources indicated that the first 'The Ascott' branded property has been finalised and is expected to come up in the National Capital Region (NCR).

Not too far behind Singapore-based Frasers Hospitality Pte Ltd, which is the hospitality arm of Frasers Centrepoint Ltd (a wholly-owned subsidiary of public-listed Fraser and Neave Ltd). Frasers has already announced three properties in Bangalore and another two properties in New Delhi and Chennai are slated to open by 2012.

In all Frasers will be managing 585 units in separate developments scheduled to open in India by 2012. In fact, in an earlier statement, Choe Peng Sum, chief executive officer, Frasers Hospitality had said that the company is aggressively working towards achieving a target of morethan 700 individual units under management contract by 2011, elevating
India to Frasers’ second largest market globally after China.

Among prominent serviced apartment brands (domestic and international) operatoring in India currently include Marriott Executive Apartments (Powai), Hyatt Residences (Mumbai and Pune), Grand Residences (Mumbai) Taj Wellington Mews (Mumbai), The Leela Residences Kempinski (Gurgaon) and pure-play serviced apartment operators like Oakwood with properties in Mumbai, Pune and Bangalore.

Providing all the features of a hotel, serviced apartments are set in a residential environment, offering a much larger space vis-a-vis a hotel room with facilities like a fully equipped kitchen, individual washing / drying machine, ample storage, quality furnishings ensuring comfort convenience, safety and security for the long-stay guests. The irony however is that thanks to the under supply of serviced apartments in the country, a significant percentage of long-stay demand is absorbed by hotels and this category contributes close to 20% of the hotel's overall business.

(Courtesy: DNA Money)

'Bikki Oberoi slowed growth of The Ritz Carlton in India'

P R S Oberoi, Chairman & CEO, EIH Ltd

Global hospitality majors would hate to come to terms with reality but the fact remains that Indian chains operating luxury hotels have thus far successfully managed to give the international counterparts a run for their money (read luxury brands). Take Marriott International for instance, one of the leading global hospitality chains has had it tough so far especially with expanding its luxury hotel brand The Ritz Carlton in India.

In fact, Simon F Cooper, president and managing director – Asia Pacific, Marriott International, often gets asked 'why Marriott has 9 The Ritz Carlton hotels in China and just one which is yet to open in India'. “I would answer in just two words – Bikki Oberoi,” Cooper said. With 266-rooms, The Ritz Carlton Bangalore is currently being developed by the recently listed realtor Nitesh Estates Ltd and is scheduled for 2011 debut.

P R S Oberoi or Bikki Oberoi as he is popularly known in the global hospitality industry is chairman and chief executive officer of EIH Ltd, the flagship company of The Oberoi Group. Just recently, Oberoi was presented with the ‘2010 Corporate Hotelier of the World’ award by HOTELS magazine. In its 29th year, the annual ‘Hotelier of the World’ award is determined by votes cast by readers of the magazine in more than 150 countries.

Oberoi is credited with placing Oberoi hotels on the international luxury travellers’ map with the opening of several new luxury hotels in Mauritius, Indonesia, Egypt and hotels in India at crucial tourist destinations such as Jaipur, Agra, Udaipur, Ranthambhore and Mashobra in the Himalayas. He has directed the development of these hotels breaking ground in new destinations and redefining architectural and design standards in luxury hospitality.

Recently, The Oberoi Vanyavilas, Ranthambhore was ranked the best hotel in the world in Travel + Leisure magazine’s 2010 World's Best Awards readers’ poll. In the same readers’ poll, The Oberoi Vanyavilas, Ranthambhore; The Oberoi Amarvilas, Agra; The Oberoi Rajvilas, Jaipur and The Oberoi Udaivilas, Udaipur were ranked 1st, 2nd, 3rd and 4th respectively in Asia and 1st, 5th, 13th and 15th respectively in the world.

As for global luxury hoteliers' sentiments about delay in getting their luxury brands in India are concerned, they get clearly substantiated from Cooper's statements. It certainly is a fact that some of the prominent global luxury hotel brands have taken ages to set foot on the Indian soil while there are others who are still awaiting their turn. Brands like The Peninsula Hotels, The Regent, Mandarin Oriental, St Regis, Edition Hotels, Waldorf Astoria, Banyan Tree Hotels and Resorts etc are yet to establish their presence in India.

On the dominance of India hotel companies in the luxury segment perse, Marriott's Cooper feels, India has historically grown up with great luxury hotels that have for years catered to global leisure travellers. “That's one key reason why growth has been a bit slower from The Ritz Carlton point of view. Having said that, going forward, I feel there is enough room for delivering luxury hotel experiences in the Indian market,” he said.

As for luxury hotel development pipeline from Marriott is concerned, Arne M Sorenson, president and chief operating officer, Marriott International Inc, said, “Of the overall signed (management contract) pipeline in India, approximately 8 hotels are under the J W Marriott brand.”

Strictly following the management contract route, Marriott currently operates 11 properties in India with a development pipeline of 30-odd hotels under various stages of construction. Keeping the overall demand scenario in mind, Sorenson is looking to take the Marriott hotels count in the country to 41 hotels by 2013 and approximately 100 hotels by 2015. The company sees its Courtyard and Fairfield brands contributing significantly to the entire development pipeline in the coming years.

Lighthouse Fund backed Concept Hospitality adding over 800 guestrooms by March '11

Lighthouse Fund-backed Concept Hospitality Pvt Ltd (CHPL) is all set to make a big splash in the Indian hospitality market in the coming quarters. A pure play hotel management firm, Concept has lined up a slew of hotel launches across the country in the five-, four- and three-star categories. In all, CHPL will add over 800 guestrooms across tier I and tier II cities across the country by the end of this fiscal.

Managing hotels under The Fern, The Fern Residency and Beacon brands, CHPL will open four 'ecotel' hotels in the five-star segment adding 391 guestrooms under its flagship 'The Fern' brand. These hotels are scheduled to open at regular intervals in the coming months going up to January 2011. The hotels are coming up in cities like Delhi (50 rooms), Mumbai (141 rooms), Ahmedabad (100 rooms) and Hyderabad (100 rooms).

One of its five-star hotel projects in Mumbai features 141-rooms and is christened Meluha - The Fern, an Ecotel Hotel. The property is being developed by the Hiranandani Group and it's the realtor's first five-star and second hotel project at Powai. The first one branded as Rodas - an Ecotel hotel is managed by Concept Hospitality as well.

Param Kannampilly, chairman and managing director, CHPL said that all the upcoming launches are greenfield hotels designed and developed by following strict 'ecotel' standards and certification norms. “These are properties constructed by a mix of new and existing, realtors and hoteliers, with a focus on eco-friendly hotels. Concept has been roped in as a specialist hotel management company to brand and operate the properties. Being pure management contracts we don't have an equity position with these developments,” Kannampilly said.

The company has also signed up management contracts for The Fern hotels in Chennai and Kolkata which will start receiving guests a couple of years from now. With work on these hotels just commenced, another 400 five-star guest rooms will get added to the portfolio by 2012. On an average, the cost per key for The Fern hotels ranges between Rs 45 to Rs 50 lakh excluding land and financing costs.

In the three- and four-star categories, CHPL is bringing in another 438 guest rooms that will be managed under 'The Fern Residency' brand. Currently under various stages of completion, these hotels are coming up in locations like Goa (20 rooms), Solapur (58 rooms), Cochin (75 rooms), Delhi (120 rooms), Mahableshwar (40 rooms), Mysore (50 rooms), and Chembur (75 rooms). The average cost per room for this category of hotels is Rs 20 to Rs 23 lakh excluding land and financing costs.

“These hotels will get operational by March 2011 and are pure management contracts as well,” said Suhail Kannampilly, VP-operations, CHPL. “We have also signed management contracts in tier II locations like in Nagpur, Ghaziabad, Tezpur, Raipur, Tirupur, Baddi, Bhubaneshwar and Lucknow. These hotels are still under construction and will take some time to get operational,” he added.

The company currently manages close to 700 hotels in 10 cities and will add another 12 locations to the portfolio taking the total to 32 cities across the country in the next 3 to 4 years from now.