Chennai gets luxurious with branded hotels

Chennai is turning into a luxury hotspot with the city seeing a surge in branded hotels and the number of rooms expected to grow by 50% next year. However, there is a downside to this boom, as this move in turn is expected to add great pressure on rentals and occupancy. CNBC-TV 18's Swathi Narayanan reports.

Conservative Chennai is suddenly becoming the destination of choice for luxury hotels. India's largest hotel, The ITC Grand Chola with 600 rooms and 10 restaurants has just opened it's doors this October. And this is not the only one. The Hyatt has also opened a new property and The Leela palace will soon follow suit. Chennai currently has 29 branded hotels with over 4500 rooms across different categories. According to a study by Jones Lang Lasalle hotels-
- Seventeen more are under construction
- This will increase the number of rooms by 3620 in the next two years
- Most of this supply - around 35% will be in the luxury segment
- By the first half of next year, the number of rooms will increase by 50%

But there's another side to this luxury boom. This sudden surge in hotels is causing a demand supply mismatch and putting great pressure on room rents. The occupancy rates in Chennai is about 65% now and rooms are being given at 30 -45% discount. And these numbers are expected to decline further but hotels remain optimistic over the long run.

Infact, according to hoteliers, Chennai is the place to be. Given that the city is a growing IT and manufacturing hub, they believe, it is only a matter of time till demand catches up.