By Jones Lang LaSalle Hotels

Chennai - A review of hotel market trends

Chennai (formerly known as Madras), the capital city of Tamil Nadu, has a broad industrial base in the automobile, computer, technology, hardware manufacturing and healthcare sectors. A large number of automobile companies such as Hyundai, Nissan, Ford and Ashok Leyland have set up their base in Chennai due to availability of skilled labour, consistent industrial policy, access to a world-class port and financial incentives offered by the government. According to Confederation of Indian Industry (CII), Chennai accounted for 60% of India�s automotive exports in 2006-07. The success of automobile sector conferred Chennai the status of �India�s Detroit�.

Chennai is also home to industries such as financial services, IT/ITeS (Information Technology/Information Technology-enabled services) and shipping, among others. It is the second-largest exporter of software, next to Bangalore. India�s top IT companies like TCS, Infosys and Wipro have large operations in the city. Such a development profile has also proven beneficial to Chennai�s lodging industry, which has consequently witnessed substantial growth over the past few years.

The automobile sector has become the backbone of Chennai�s economy and has added impetus to the growth of its lodging market, as well. A development pipeline of over 3,600 rooms in the branded segment alone speaks about the potential of Chennai�s hotels market. At present, the city�s existing inventory stands at about 4,650 rooms. This translates into an increase of 77% in the total hotel room supply.

As a result of increased business activity, passenger traffic at the Chennai International Airport has witnessed a considerable increase over the past decade. The total passenger traffic for the year 2010-11 stands at a little over 12 million. This includes both domestic and international traffic.

The city�s hotel market performance is expected to be constrained in the near term as a majority of the new supply opens in 2012 and 2013, with a high proportion of new rooms in the 5-star segment. However, the adverse impact is expected to be short-lived, considering the significant commercial and industrial developments planned across the city.

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