Bengaluru | Hotel Micro-Markets – The Way Forward
Bengaluru is well connected to the rest of the country by air, road and rail. The Kempe Gowda International Airport (KIAL), located 35 km north of the city-center, commenced commercial operations in May 2008, and currently handles 26.9 million passengers per annum. It is one of the busiest airports in India in terms of domestic traffic, with a CAGR of 24.8% over the last five years.
Figure 1 : Bengaluru Airport Statistics
Central Bengaluru has been a hospitality hub for many decades, with hotels like The Oberoi on MG Road, Taj Westend on Race Course Road and The Leela Palace on Old Airport Road establishing the base of branded supply in the city. Gradually, as this area witnessed saturation in terms of space available for commercial activity, the city started expanding in all directions. Soon, commuting between hotels in the CBD and the commercial hubs in the peripheral areas of Bengaluru started posing a major challenge for travelers, with traffic congestions resulting in massive delays. Consequently, the peripheral areas began witnessing holistic infrastructural development, with each of these suburbs having commercial, residential, retail and hospitality components. Over time, as the rooms supply in these areas grew and demand generators in the city were more evenly spread out, Bengaluru saw the emergence of hotel micro-markets. Generally, poor accessibility can be detrimental for a hotel market, however, in the case of Bengaluru, this challenge allowed the growth and sustenance of various micro-markets that have a negligible demand overlap with the original CBD hotels.
To better understand these micro-markets, we have analyzed the keys demand segments serving each of them in Figure 2.
Figure 2: Demand segmentation
Bengaluru is the fourth largest technology cluster in the world after Silicon Valley, Boston and London, with 80% of global IT companies having based their India operations here. The city’s current office stock spans approximately 120.6 million sq ft, with a further 25.4 million sq ft under construction and expected to be operational by 2020. Most of these developments are sprouting along the IT Corridor and upcoming micro-markets, with CBD’s office inventory only going up by 1.4%.
These facts indicate that Bengaluru’s economic growth is focused toward the suburbs, and with it, the city’s hotel industry is getting a larger representation from peripheral hotels. Moreover, with demand anticipated to increase steadily in the coming years, hotels are now focusing on improving average rates. Looking ahead, our outlook for the city is positive, as we expect hotel performance to witness further growth in the short to medium term.
For more information, please contact Karan Rahan at [email protected]