Cover Story

Midscale hotel business in Bengaluru

Share

With the rise in demand for branded midscale hotel rooms in India vis a vis the Garden City, GMs of well-known hotel brands in Bengaluru met at the recent 37th edition of EF&H Expo in the city to discuss midscale hotel business
By Akshay Nayak

The second day of the 37th edition of EF&H Expo in Bengaluru witnessed a panel discussion with GMs of midscale hotel brands in Bengaluru. The esteemed panelists were Shinoj Joseph, GM, Hotel Royal Orchid Suites; Prakash Mahato, GM, Golden Tulips Bangalore and Mitesh Narula, cluster GM, Keys Select Hotel Hosur Road, Bengaluru.

Mitesh Narula

The panelists opened the discussion by sharing their views on how the Bengaluru market has evolved over the years for various industries including hospitality for its diversified micro markets. Narula said, “There are micro markets in Bengaluru as the city on its own is 790 sq miles. You cannot have a city centre concept anymore. As the city grows, micro markets become even more relevant to the current scenario. Hotels can then be located within these micro markets and thrive. Say hypothetically, if you only had a city centre concept just imagine hotels like Golden Tulip and Keys Hotels being about 15-18 kms away from the city, it would have been extremely difficult for the people who stay in the hotels and knowing the infrastructure issue in the city travelling from point A to point B. In Bengaluru, nobody speaks about kms anymore, but the distance is counted in the amount of time taken to travel. We can notice a huge difference between what Whitefield, Hosur Road, Electronic City were about eight years ago as compared to now. In fact, Keys Select Hotel Hosur Road opened in 2009 when we were doing 35 per cent occupancies, but today we are doing 73 per cent occupancy, so definitely the market has grown and you can see more and more travellers coming in.”

Prakash Mahato

Mahato pointed out that if one compares the growth statistics from about 15 years ago, the segment contributed to about 25 per cent of the total branded hotels. Today the figure is about 45 per cent which is phenomenal. “I am very confident that the majority of the growth will come from this segment. Due to increasing income of the middle class, their spending power is increasing too. There is also growth in the leisure segment that has happened, wherein the midscale hotels again fit in. My hotel is in Electronic City and is a purely corporate hotel. So Monday to Friday, my occupancy is driven by all the major IT services provider TCS, Wipro, etc, as they are in close proximity to my hotel. There are many hotels that have also come near Yeshwantpur to support the exhibition centre,” he said.

Shinoj Joseph

Joseph added, “Agreeing that we are now at 45 per cent in the midscale segment, the total number of hotels signed in the period of 2017-18 and looking forward to 2021, we should have about 75 per cent of foreign hotel brands operating in India in the midscale segment. We also are looking at the hidden markets like at the airport we have the Regenta Inn. So with Regenta Inn and Regenta Central, we are looking at about 4000 ARR, which is on the growing curve now. Another market i.e. Narasapura has a Honda two-wheeler manufacturing unit of Asia, where we do not have any hotel. In 2001-2002, BestWestern, Comfort Inn and all were popular in India and now they are coming back. Likely in early 2021, there will be a Best Western in Narasapura which will be a 155-keys property. If you talk about Royal Orchid Hotels, it started with very limited number of hotels which are now rebranded as Regenta Place and of course the flagship brand Royal Orchid. We are having around 53 hotels operating across India. In 2017-18, we recorded RevPAR growth of 8.5 per cent only for midscale hotels, when growth of only 5.1 per cent was registered in the five-star hotel
category.”

Evolution of Tier-II and III markets
Tier II and III cities are the places where the maximum growth is happening right now, the speakers opined. Narula informed that midscale is the segment where growth is driven by domestic demand. “Due to the extended income in their hands, they are willing to spend. Mostly these travellers visit Tier-II and III cities because these are new destinations for them. Bengaluru as a MICE destination has been prominent for a very long time, but most of the domestic travellers want to try out new cities. If you look at Coimbatore and Ranchi, those are the hotbeds of growth that is happening,” he noted.
Speaking about the mushrooming tier-II markets in Karnataka, Mahato said, “If you look at Tier II and III cities, Hubli and Shimoga, Royal Orchid Hotels have their properties there. Business is shifting from Tier-I to Tier II and III cities, maybe for the reason that the cost of labour is less there.”
As per a study by Hotelivate, the demand is increasing by eight per cent year on year whereas the supply is actually less which is the reason due to the boom in upcoming hotels, felt Joseph. “The hotel brands are going into Tier-II and Tier III cities considering the lesser operational costs. Air connectivity is also good for short-haul locations like between Bengaluru and Mysuru which was not possible earlier,” he highlighted. Also, the top management of companies earlier wanted to stay only in a luxury set up, but now they too are moving to budget hotels. And if you meet all the amenities like cleanliness, security, breakfast, wifi, bed, and a nice bathroom the requirement of the guest is done, which is why the midscale segment is growing, he added.

Indigenous v/s international chains
Giving an overview about the investment by international hotel chains in the midscale segment in India, Narula informed that 100 per cent of international hotel brands in India are working on the asset-light model, wherein they are just managing the properties. “The reason they usually don’t want to go into the midscale segment is due to lower ADRs which in turn will reflect in their GOP, so it is not that lucrative for them. International brands have a huge portfolio of brands and they can afford to get into the midscale market,” he observed.
Mahato said, “Golden Tulip is part of Louvre Hotels which is based out of Europe. So there are advantages that the GDS booking will always be on the higher side, compared to a homegrown chain, plus due to the loyalty programme, my hotel will be preferred over other hotels.” Joseph remarked that what many global hotel management companies are doing is, in one city they are having all categories: five-star, four-star and three-star. Indian brands too are going out of India. “The West Asian market and Sri Lanka are potential markets to be tapped by Indian hotel brands. We are talking to someone in these markets to have our hotel there. Taj, The Oberoi and LaLiT have proved that Indian brands going international is possible,” he noted. One hotel chain which is doing well in the African belt is the Sarovar brand, so the foreign market is already a tested field for the indigenous brands, added Mahato.

Turbulence felt by the segment
Middle-class guest profile being a major contributor to the midscale hotel sector, the speakers felt that every time the airline industry goes through a turbulent time, travel gets affected and the traveller who gets the most affected is the one who uses the midscale segment hotel. “Every time airlines go through a turbulent time, it becomes difficult to increase the ADRs while we also record a drop in occupancies. However, these are not the factors that will sustain for long,” Narula positively opined.


Share

Related posts

The Rising Star

EF&H Staff-Mumbai

Empowering Education

EF&H Staff-Mumbai

Winning Laurels Globally

EF&H Staff-Mumbai

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More