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Initial Feasibility Report Of Full Service Apartments
 

Initial Feasibility Report Of Full Service Apartments

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    Initial Feasibility Report Of Full Service Apartments Initial Feasibility Report Of Full Service Apartments Document Transcript

    • 1 Initial feasibility report of Full Service Apartments Summary: There is a service gap in the hospitality industry • Serviced Apartment(S.A) witness up to 90% occupancy rate in Bangalore • Medical tourism one of the major diver of growth in S.A • Bangalore accounts for 51% of foreign business travelers visiting India annually • Prelude: A Serviced Apartment is a type of furnished, self-contained apartment designed for short-term stays. Serviced apartments usually come equipped with amenities that can be found in a regular home, such as a refrigerator, microwave, cutlery, washer/dryer, TV, and internet access. In addition, many offer a dining area and a dedicated work space. Prices for serviced apartments are typically lower than equivalent hotels rooms, especially when the stay is prolonged. The concept of a luxurious and sophisticated apartment in the heart of the central business district, with cleaning services and access to high-class facilities and amenities is nothing new, but recently the service apartment, with its superior features and lower costs, is increasingly becoming the norm in Asia. This document looks at: Global Trend • Asian Market • Indian S.A Market • o Bangalore o Case of Holy Cities S.A (News Item) Limitation: Data used is from secondary sources •
    • 2 This document is a brief presentation of Bangalore potential for S.A • Global Scenario: The serviced apartment market has evolved dramatically from its origin in the US in the early 1980s and nowadays across the world is considered as an alternative accommodation concept, especially for those who do not want to stay in hotels or commit themselves to private property rentals. Globally about 30% of the lves space is offered by service apartments while hotels account for 70% of the room rooms. Global Room Scenario S.A Rooms 30% Hotel Rooms 70% Figure 1: Global perspective Asia & Australia: The market in Asia is booming, largely at the expense of the traditional hotel industry, with one decisive factor contributing to their success and growing popularity: cost effectiveness. Serviced apartments are generally much cheaper than hotel rooms and, when you consider how much more space a guest is getting, they offer excellent value for money. With increasing cross border business investments and trade, and a growing number of corporate executives traveling on assignments over the last decade, new global business patterns are driving the growth of the serviced apartment business. There is also an increasing trend of business travelers choosing serviced apartments as accommodation option over hotels. These business travelers, although on transient stays, prefer the bigger space, tighter sec security
    • 3 and exclusiveness, as well as greater value for money, all of which serviced apartments endeavor to offer. Indian Story: Home away from home. The tagline promoting an eclectic staying option had always appeared catchy. The tentativeness of a sunrise industry's logo has given way to confidence, and the verdict is lucid. The niche option of checking into serviced three- or five-star apartment quot;homesquot; instead of hotels has enough takers to make service apartments one of the fastest growing segments of the Indian hospitality business. In cities like Mumbai, Delhi and Bangalore service apartments help avoid the tiresome transactions required to lease flats. Says Sunil Mantri, joint secretary, Maharashtra Chamber of Housing Industry (MCHI): quot;The municipal taxes in Mumbai are probably the highest in the world and the new lease and license agreement rules have made it almost impossible to lease out flats here for less than 11 months.quot; In the past few years, there has been a significant increase in the number of international business travelers to India, many of whom come for long stays, ranging from one month to a year. And this in turn has resulted in a huge demand for service apartments, especially in IT hubs like Bangalore, Pune, Chennai, Hyderabad and Gurgaon. The market is currently pegged at Rs 1500 crore and growing at a fast 200 per cent per annum.1 1 Publication: Hindustan Times Provider: HT Media Ltd Date: April 13, 2008A Home Away From Home April 12 by Manoj Sharma
    • 4 Tier I cities Mumbai Bangalore Calcutta Madras Delhi Figure 2: TR1 Cities IT Hubs Bangalore Pune Hydrabad Noida Gurgaon Madras Chandigarh Figure 3: IT Destination We will now look at the S.A trend in the IT Hub “Bangalore” “Bangalore”.
    • 5 Bangalore2 Located on the southern Deccan Mysore plateau, Bangalore is the nerve centre of the IT industry in India and is the world's fourth largest technology hub. Population-wise it is the fifth largest city of India. It has a fairly diverse portfolio of activities with firms manufacturing machine tools, electronic products and auto-components, besides the IT sector. It is also a favored biotechnology destination. All these activities have led to a phenomenal demand in the hospitality sector. Bangalore has a host of reputed hotel chains ranging from deluxe hotels, heritage hotels, airport hotels to budget hotels. However, given the current levels of available rooms in the city, only 60 per cent of actual room requirements are being catered to leaving a substantial demand-supply mismatch. Current scenario Bangalore accounts for 51 per cent of foreign business travelers visiting India annually. International corporate travelers occupy almost 90 per cent of the hotel rooms here. Over the last couple of years, the city's booming IT/ITES sectors have been responsible for nearly 45-50 per cent of the overall demand for rooms in the city. There has been no significant change in the domestic and foreign business clientele in the five-star category hotels owing to shortage of supply of rooms. However, there has been a sharp decline in the number of leisure travelers visiting Bangalore. According to Knight Frank Research, since 2004 there has been a slight shift in room demand from the premium segment to the budget segment due to the increase in room rates. Most of the five-star category hotels like Windsor Manor, Le Meridien and Grand Ashok are concentrated along the Golf Course Road while four-star hotels like Oberoi and Taj 2 Publication: Express Hospitality Provider: Indian Express Newspapers (Bombay) Ltd. Date: June 30, 2007
    • 6 Residency are located in the CBD of MG Road. Few three- and two-star hotels are located near the railway station catering to the domestic travelers. However, most of the new hotels are coming up in the peripheral locations of Outer Ring Road and Whitefield with a view to cater to the needs of the corporate locating in the new business locations of the city. Hospitality sector demands in Bangalore continue to be robust owing to the heightened commercial activity in the city. Apart from this, medical tourists coming to Bangalore for inexpensive medical treatment are also fuelling this demand. Bangalore has around 2,527 rooms in the premium category. This inventory is highly deficient considering the growth rate of room demand in Bangalore. Figure 4: Average Room Rent The ARR in premium category hotels in Bangalore has recorded a growth of 18.5 per cent at Rs 13,366 for the nine-month period (April to December 2006) against Rs 11,280 in the corresponding period last year. Significantly, the occupancy rate of hotels in Bangalore, currently at 75 per cent, has been observed to have declined marginally in the recent years. The development of the new international airport project has attracted a number of hotel chains such as Radisson, Hilton and JW Marriott to the city. This is with the anticipation that the number of international travelers to the city will increase with the commencement of the new airport. Knight Frank Research estimates that around 3,075
    • 7 rooms in the premium category and the service apartment segment is likely to be added to the city over the next five years. The current limited hotel room inventory and a booming commercial market has driven existing hotels like the ITC, the Taj, Oberoi, and the Capitol to come up with more properties along the Whitefield Road and Outer Ring Road. Also, international hotel chains like Hilton in joint venture with DLF, Accor with Emaar MGF and Wyndham with Royal Orchid Hotel are also venturing into Bangalore's hospitality sector. Outlook The government of Karnataka plans to encourage public-private partnership for developing tourism infrastructure and to promote Bangalore as a destination for MICE by developing convention and exhibition infrastructure facilities. Plans are underway to offer government-owned land at 50 per cent of the market value to entrepreneurs wishing to set up new resorts and hotels. Incentives in the form of tax concessions are also being provided to domestic airlines and operators to encourage increased traffic to and from the state. In spite of a large amount of investment taking place in the city in the real estate sector, infrastructure still has a long way to go. The increase in the number of long-stay business travelers and limited number of hotels has lured business travelers to service apartments both in terms of cost and comfort. Service apartments such as Brigade Homestead on Lavelle Road and Prestige Oakwood in UB City on Vittal Mallya Road offer stop-gap cost-effective facilities for extended stay. The occupancy level in service apartments ranges between 80-90 per cent. Companies like Infosys have set up an in-house 500-room hotel complex for its clients and other visitors coming to Bangalore. International groups like Oakwood, Marriott and Shangri- La have already tied up with local players to set up service apartments in the city. Thus, based on current macro-economic trends and the business outlook, Bangalore will continue to witness a stable trend in consumption, influenced by higher disposable income. The emergence of relatively new markets and consistent demand for quality
    • 8 accommodation across most business destinations from niche markets, such as the extended-stay segment, will ensure that the hotels in Bangalore have a required base demand. Besides, foreign tourist inflow will enhance the popular leisure destinations in the city by readily absorbing future hotel developments, thus enabling a continuation in the present trend of value appreciation.
    • 9 Chain Of Service Apartment To Come Up In Major Pilgrim Centers Kochi, Sep 17 (PTI) A Kerala-based private company has proposed to set up a chain of service apartments at the major pilgrim centers in South India with the debut project coming up at the temple town of Guruvayur. With a target of Rs 500 crore turnover in three years, the apartment projects are being planned in Palani, Velakanni, Tirupati and Puttaparthi, Sudhir Gopi, Chairman and Managing Director of Sudhir Gopi Holdings (SGH), pioneers in the field of higher education told a press meet here. In Guruvayur, the Sudhir Gopi Developers Pvt Ltd (SGDPL), the real estate arm of SGH, is coming up with 12-storeyed 76 fully-furnished and airconditioned apartments--'Vaikundam Retreat', costing between Rs 60 lakh and Rs 70 lakh. The two-bedroom apartments would have a built-in area of 1400 square feet and would be completed by April 14, 2009, he said. Gopi said he was expecting a Rs 50 crore turnover from the Guruvayur project. The method mentioned in this news item can be used in promoting the Shirdi Real Estate business, a chain of S.A all over Maharashtra’s holy cities. Way forward: Further study needs to be done on current trends. Economic update (macro picture of supply and demand) • Business approach versus leisure • Development strategies • Design and marketing • Business Model and best practice • Investment return + Financing • Joint Ventures and Partnerships • Property management • These points would be useful in understanding the business further.
    • 10 References http://www.ameinfo.com/157588.html (June 18, 2008) http://www.escapeartist.com/efam/85/serviced_apts.html (June 18, 2008) http://www.financialexpress.com/news/Service-apartments-the-new-hospitality- buzzword/119795/ (June 18, 2008) http://www.terrapinn.com/2007/sasg/Custom_15692.stm (June 18, 2008) http://www.terrapinn.com/2007/sasg/Custom_15692.stm (June 18, 2008) http://www.india-today.com/itoday/20010806/lifestyle.shtml (June 18, 2008)