Bangalore to become home for luxury hotels in 3 years

Bangalore will house 20 new luxury hotels within the next three years, with real estate developers betting big on the hospitality sector making a comeback post the 2008 slowdown. But obtaining project funding might still not be an easy task, reports Vineetha Athrey of CNBC-TV18.

After three lacklustre fiscals Bangalore's hospitality space is all set to get its sheen back encouraged by the pick up in the commercial realty segment, and with occupancy levels for luxury hotels rising to 65%, Bangalore-based developers are bringing hotel projects back on track. Twenty new 4 & 5-star hotels are being planned in Bangalore, which will increase the inventory of rooms by 12,500 by FY’16, these include Hilton, JW Marriott, Ritz Carlton, Sheraton, Hyatt Regency, Conrad and Holiday Inn
by developers like Prestige, Brigade Hospitality, Nitesh Estates and Mantri.
 
Ram Chandnani, deputy managing director, South India, CBRE says that we have seen a y-o-y increase in commercial space absorbtion. Last year we recorded approx 11 million sq.ft of commercial space absorption and again this year we expect the market to touch those similar levels. With the increase in commercial space absorption automatically there is an increase in the inventory of hotel rooms. Ashwini Kumar, COO, Nitesh Estates Bangalore, says that this is the good time to launch and when the economy once again starts moving up, then that would be the time when this would start capitalising on it. But, funding projects could be an issue. Unlike the residential segment, where developers get customer advances, hospitality requires upfront funding and offers no immediate returns. So, developers are looking at hospitality-specific funds, who can be strategic partners and not just investors for eg, Brigade Hospitality, a 100% subsidiary of Brigade Group, and a key player in this market, which is looking to raise Rs 200-300 crore to fund an upcoming Holiday Inn in Bangalore and two mid-segment hotels in Mysore is looking to adopt a similar strategy. Vineet Verma, CEO, Brigade Hospitality, Bangalore, says that there are so many brands coming in, and funds are vary and if they are looking at investing, it's mostly acquisitions they are looking at so we are open to either entity level funding at hospitality or even SPV level funding for specific hotels. Also, with 20 new launches lined up over the next three years, experts say there is a fear of over-supply in the market in the short term leading to some price correction in room rates. But in the long term, promoting and marketing Bangalore as a meeting and conference hub, could help the city's hospitality sector get back to good times. Also watch the accompanying video.