Five stars for this new development in Bangalore

If the soaring onion prices made you teary-eyed, this bit of news is sure to make you smile.

A report by real estate consultant Knight Frank has predicted that the average room rates (ARRs) of hotels in Bangalore might dip from Rs9,386 per room this year to Rs7,620 per room in 2012.

Dr Samantak Das, national head – research, Knight Frank, says this would happen because demand for rooms will not be able to keep pace with the supply.

According to Das, many new hotel properties that were planned during the boom time in 2007-08 will release inventories into the market between 2011 and 2013. This, in his view, will bring down the occupancy rate (percentage of rooms occupied) of hotels in the city from 61% to 44% in 2013, pulling down their ARRs.

The Knight Frank survey indicates that the number of rooms demanded in upscale category will increase from 2163 in 2010 to 2883 in 2013. Though, in reality, close to 3800 rooms are expected to come into the market.  This will skew the demand and supply equation.

Interestingly, the city had witnessed one of the highest ARR rises in the country in 2007-08, when it soared to Rs10,800 per room due to the unprecedented demand for hotels. It was this phenomenal rise in ARRs that led city developers like Brigade, Adarsh, Nitesh and Prestige to check into the lucrative market.

It also caught the attention of players like JW Marriot, Ritz Carlton, ITC, Zuri, Lemon Tree, Savannah Sarovar, Fortune Select Trinity and others who have aggressively added capacity. Taj, which already has five properties in the city, will open its over 300-room Taj Vivanta at Yeshwantpur next year. At the same time, plans are afoot for setting up one more hotel at Bannerghatta. 

All this addition is softening the rack rates of hotel rooms. 
Shireen, PR manager of Chancery Hotels, confirmed the trend: “Yes, (room) tariffs are easing.” Dr Das expects demand and supply for hotel rooms to converge and stabilise after 2013.