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Hospitality business in the Land of the Nizams

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As Express Food & Hospitality Expo gets set to roll out in Hyderabad, General Managers of leading hotels in the city and industry associations like TSHA and HRATS share their insights on the hospitality market here By Steena Joy

Aided by Telengana’s political stability and the state government’s zeal to focus on infrastructure developments in and around the city, the state’s hotel industry has witnessed a steady occupancy growth. Hotels in the industrial hubs of Hyderabad, Gachibowli and Madhapur, are seeing a robust growth in room demand, driven by the booming IT/ITeS and corporate sectors.

Reginald Corbett

The development policies initiated by the Telangana government are the key factors driving the environment for multinational companies to establish their presence in Hyderabad which is acting as a backbone of the city’s hospitality industry. Apart from MICE, its growing prominence as a medical tourism destination is also playing a significant role in attracting foreign tourists to the city.
The Telengana government has plans to develop budget hotels in all district headquarters. The Telengana State Tourism Development Corporation (TSTDC) has written to the District Collectors seeking land for the proposed budget hotels to provide affordable accommodation to tourists, according to its managing director, B Manohar. TSTDC currently offers accommodation with its Haritha chain of hotels and resorts in four districts.

Roshan Rajpal

Ashok Hemrajani, president, Hotel & Restaurants Association of Telengana State (HRATS) informs, “HRATS is the officially recognised body which represents 3-star to 5 star hotels with few fine dine restaurants as well. We are affiliated to SIHRA and FHRAI. As you know from 2010 to 2014, unified Andhra Pradesh went through difficult times when the bifurcation took place and all problems associated with it. So the industry saw really tough times. Low occupancies so lower ADRs, no investments, no visitors, no corporate movements. Once the political unrest was over, the last few years have seen some stability in the market. Market has been looking up. The state government is stable and well supported by the central government.”

Ashok Hemrajani

He adds, “We did couple of roundtable discussions with the secretary revenue who is also the GST in charge here. He had a very good understanding of the GST subject and its impact on hospitality like the confusion of GST on rooms earlier. Some GST issues were resolved down the line. Some issues are still there. Hyderabad has also been growing well as a MICE destination and wedding destination. The 28 per cent GST does affect these segments. There are certain statistics being shared by various trade bodies that there is a lot of MICE business going out. I personally know of some family friends who did two destination weddings in Phuket and Mauritius rather than looking at Goa or Udaipur. They found it cheaper to do the weddings in these international destinations than doing it in India today. So those are some challenges associated with GST which probably need to be streamlined in the interest of the guest not getting confused and hassled.”

Ravi Khubchandani

He opines that there are also a lot of issues on ease to do business which probably need to be streamlined in the Tourism policy of various states and as tourism is a Concurrent subject, the lead needs to be taken by the Central govt and then the states can follow suit. He adds, “Then there are issues on playing copyrighted music in hotels. Whom do I pay? There is a confusion in the market. Also the issue of MRP on aerated water. Recently the banana issue in a five-star hotel drew a lot of attention. One must remember that we are under the service provider category and not registered under retail category.

Ashutosh Chhibba

Considering how capital intensive it is to put up a hotel in India, the hotel is obviously going to charge for the service element and it is within its rights to charge it at whatever price.”
According to Hemrajani, both in the F&B category and in the rooms, the market is looking up. “We hope that it will only grow further in occupancies and ADRs. Not too much of supply is being added as such because first the existing supply has to be absorbed by the existing demand. So with the slow growth of demand, supply is also growing slowly in parity. And yes, with the help of the government it has to go beyond Hyderabad into the Tier 2 and 3 cities of Telengana, then we can truly say we are talking about Telengana centric rather than being just Hyderabad centric,” he affirms.

The city comes of age

Soumitra Pahari

Reginald Corbett, regional manager Hyderabad and GM, Lemon Tree Premier, Hitec City says, “Hyderabad is doing well especially in the Hitec area; the CBD was doing well earlier but now most high paying customers are heading to this side of town. So it is growing and it will begin to do well further. ARRs at national level is doing about Rs 6000 whereas Hyderabad is doing Rs 5500, just Rs 500 lesser. Occupancies at national level is about 66 per cent; Hyderabad is doing more than 70 per cent. So there is at least a six per cent difference between the national levels and Hyderabad.” As far as demand supply is concerned, he feels that there is always going to be a gap. “At certain times demand is so huge that we cannot get rooms especially when there are conventions, medical conferences or relocation periods especially in June-July when MNCs are doing their recruitments. The Hitec City area and the financial district will do well. In fact these two used to be clubbed together earlier but now they are two different markets. They are micro markets that cater to the IT crowd,” he adds.

Manish Dayya

Ravi Khubchandani, GM, Novotel Hyderabad Airport says, “Hyderabad has really come a long way in the last few years, especially the last three with a stable government. Hyderabad has always been known as the convention capital of India and now its has gained more momentum with a lot of standalone facilities as well. So the city is really coming of age in the convention and conferencing space. Occupancies have been constantly growing and stabilising post the bifurcation. Business is growing, so is supply and at the same time, demand is beautifully catching up. Most of the development is happening around Gachibowli, Hitec area but there are pockets that are also developing like near the airport where we are located. Airport traction has grown phenomenally, we are talking of some 20 million passengers from seven or eight million a few years ago. It is healthily inching towards the 70 per cent mark in room occupancies. Across all structure of hotel segments, the average rate is Rs 5500 in ADRs. Sentiment is very very positive. The city is also huge on social events. We cater to some of the biggest weddings in the country. Not like Goa or Udaipur but it has got its own niche in the south India market.

B Adarsh Rao

Mostly because of the infrastructure Hyderabad has to offer- beautiful convention conferencing and exhibition venues that can be easily utilised for opportunities of this nature.”
Manish Dayya, GM, Novotel & HICC, agrees, ” In terms of rooms, Hyderabad is one of the top performers in the country – seeing a RevPAR growth of almost 13 points vis a vis the previous year. Many convention centres has been added to the city but what has put Hyderabad on the global MICE map is this unique complex of the HICC and the Novotel with the largest pillar free hall of 65,000 sq ft!2018 was really great for us with more than 1400 MICE events held here. Our focus this year is a lot on social events, we also want to make Hyderabad a wedding destination hub. MICE is a huge space for everyone to grow through. For us, it is the largest segment we cater to because we are a MICE driven hotel.” Commenting on GST impact he says that GST has not had any major impact. “In fact it has brought in a lot of standardisation so now the client knows exactly how much he has to pay, there are no more hidden costs.

Sandeep Joshi

We are the market pullers and drivers for ADR in the city. And more demand drives everyone’s revenues. Hyderabad is also the only city that has a dedicated Convention Bureau (ICPB) purely focussing on MICE movement,” he informs.
Tejinder Singh, GM, ITC Kohenur, says, “Market is very professional and competitive. ITC as a true blood luxury hotel brand, has a different feel to it. ITC Kohenur is a very unique building. Hyderabad is a very upcoming and cosmopolitan city. It is a city with a lot of ambition. So we thought we should build a hotel the city can be proud of. The market operates around 70 per cent room occupancies in our competitive set of luxury hotels. ADRs ranges from Rs 7000 to 7500 in the lower spectrum of the luxury segment. There is a lot of sq ft under construction and good thing they are also being occupied. So as occupancies grow, business will also grow and the city will only grow this side as the financial district is already saturated. This side of the city near Jubilee Hills has a lot of room to grow. The investment into Hyderabad right now is nowhere close to what it ultimately will be. Business is coming in and there is an availability of talent in these micromarkets as well. Our restaurants are doing fabulously well with a lot of international flavours as well as traditional forgotten cuisines.”

Tejinder Singh

Another member of the ITC hotel chain, ITC Kakatiya has a huge brand equity in the Hyderabad market and Ashutosh Chhibba, GM, who has come back to the hotel after nearly 22 years, has the distinction of being its first banquet manager. Commenting on the hospitality business here, he notes, “The demand and growth is actually in that part of the city – the Financial District averaging 70 per cent plus. This part of the city is not doing too well. Average occupancy is 68 to 70 per cent. Rooms in this part of the city are lesser with no new supply coming in. The government is really involved in developing tourism in Telengana. Its a new state and we need to give them some time. They concentrated their efforts on the Financial District so far and you see the results there so that will percolate to the rest of the state as well.”

Top performer

Ian Dubier

Ian Dubier, area director, Hyderabad and GM, Taj Krishna observes that Hyderabad is one of the two markets currently in India which is seeing growth. “We have seen a slump in every other market apart from Bengaluru and Hyderabad. Hyderabad is currently topping the charts. With the kind of infrastructure coming up around the new part of Hyderabad which is Hitec and Gachibowli or the Financial District, the future looks bright for at least a year a half or two. We have seen enormous growth. There is always a time for rationalisation or things flattening out.” About GST, he feels that though there was an initial impact, overall it has not impacted the market. Commenting on the impact on social and wedding market, he says, “I have always felt that weddings in India have been a very unstructured market and as when there are tax implications they will be affected. Hotels this side of the city are completely corporate; we do not depend on social events at all.”
Sandeep Joshi, GM, Radisson Blu Plaza Hyderabad, had a different view. “Compared to Delhi and Mumbai, the Hyderabad market has lower rates. It is still a struggling market though it has shown growth in the last three years. The market is going through a rate correction I feel Any ADR is around 4500 compared to other metros which have reached 7000 plus. Any occupancy is around 60 per cent. It has improved from last two years when it was around 52 per cent. 2019 is expected to be a bit stagnated with attrition and economic slowdown. But 2020 looks much brighter for the city,” he says.
Speaking from the young hoteliers’ perspective, B Adarsh Rao, Telengana State Hotels Association (TSHA) Youth representative, notes, “The industry is seeing a lot of young people entering the restaurant space or the clubbing space and pubs. Good to see new blood entering this industry. The freshness of ideas, the kind of concepts, new brands the young entrepreneurs are coming up with is completely different from traditional models. Microbreweries is one concept and cloud kitchens are new business models the young generation of hoteliers are looking at. It is easier to scale up in these models like these and QSRs with lesser investment compared to traditional businesses. We have tied up with Swiggy for our cloud kitchen in Miyapur for a eight km radius.More than 100 hoteliers here have tied up with Swiggy for nearly 38 cloud kitchens across the city and many hoteliers are using the facilities. Swiggy operates the cloud kitchen on revenue sharing basis with the hotels depending on brand to brand. It is rent free; they invest on the infrastructure.”
Soumitra Pahari, GM, Mercure Hyderabad KCP, “Business is growing after the government stabilised. Lot of inventories are being added. The pharma and traders industry is a big feeder market for us. ADRs are constantly growing, but they are not the highest and can grow more. YOY there is a five to six per cent growth in ADRs. Speaking of room occupancy, Hyderabad hotels are trading at 76 per cent occupancy and it is growing YOY and in 2020 we are expecting it to grow further.
Roshan Rajpal, GM, Hyatt Hyderabad Gachibowli has seen the business evolve in Gachibowli where the hotel is located. “Three years ago when Telengana was formed, Gachibowli or the Financial District was considered as the outskirts of Hyderabad. Over the last three years we have seen the boom with massive MNCs setting up shop here. It has become the IT segment capital of Telengana of course but it is also giving Bengaluru a run for its money. The health of the IT techparks is robust so the need for hotels has obviously increased.Occupancy is really not a challenge any longer. Hotels are driving optimum occupancies from Monday to Friday. ADRs are on a huge upswing. Our ADR has grown a lot this year. We are concentrating on the RevPAR for the hotel because that’s where we can see the right returns coming in for us. So there has been a clear growth of almost 30 per cent in occupancies and RevPar in the hotel.”


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