Prime destination for hotel investors

CHENNAI: As Chennai emerges a bustling business destination, with auto majors and the services sector dotting Sriperumbudur, a real estate study says the region will become an attractive and desirable market for hotel investors and operators. According to Jones Lang LaSalle’s (JLL) ‘Hotel Intelligence Report’, Sriperumbudur is emerging as a significant growth corridor with no branded hotel to date, which makes the region attractive and desirable to hotel investors.Chennai currently has 29 hotels with an inventory of 4,656 rooms. This is expected to see a significant increase with an upcoming inventory of 3,620 rooms spread across 17 hotels within three years.As a result of growing demand, occupancy levels have been fairly stable during the past four years. However, with a continuous addition of branded supply, the market has witnessed a decline in average rates. Because of this, there has been an 11 per cent decline in revenue per available room since 2008-09.The JLL study expects marketwide average rates and occupancy levels to remain constrained as new supply opens in 2012 and 2013, with a high proportion of new rooms in the luxury and upper upscale segments. But this adverse impact is expected to be short lived with significant commercial and industrial developments planned across the city, the report states.According to Jones Lang LaSalle Hotels’ research, there are 17 hotels currently under construction in the branded segment in Chennai with a total inventory of 3,620 rooms. However, this number excludes an inventory of almost 2,500 rooms that are currently in various stages of planning and are expected to hit the market within the next five to seven years. It should be noted that the bulk of the upcoming supply is being developed along the OMR, with a number of projects planned in Sriperumbudur and this can be seen as future growth corridors for Chennai’s lodging market.The major part of the upcoming supply in Chennai will be in the luxury segment (35 per cent), with fewer rooms planned in the midscale (25 per cent), upper upscale (18 per cent) and economy segments (15 per cent). Serviced apartments and upscale segments contribute only four per cent and three per cent respectively.