April 17, 2006

Escalating land prices hit budget hotels

Budget hotels are finding it difficult to make their way into the metro cities thanks to rising real estate prices.Many hoteliers, who had earlier planned to develop no-frill basic hotels in A class cities like Mumbai, Delhi, Bangalore, are now taking a re-look at their plans. They are either modifying their plans to focus on the mid-market 3-4 star categories or taking their budget property plan to the secondary cities.French Hotel major Accor, for instance, does not see a potential for its world famous budget brand 'Formula One' in India. "The challenge is to actually find suitable land at a price that makes sense. At the moment, we are not bringing our lowest price brand in India," said Michael Issenberg, President (Asia Pacific), Accor Hotels Group.High expectationsOthers say that it is difficult to offer low hotel rates because the overall expectations of Indians have increased and they are increasingly seeking international standards."India is globalising. Their expectations are the same as everywhere else in the world. We should hence not look at 'Indifying' our hotels," said Stephen Ford, VP, Starwood Asia Pacific Hotels & Resorts.However, analysts say that the potential for budget hotels continues to be good enough in secondary and tertiary cities."In general, there has been a significant increase in capital value of land. Capital value moves differently in different cities depending on the infrastructure. As infrastructure increases, land prices go up," said S Sriniwasan, ED, Realty Fund, Kotak Mahindra Investments.As land costs soar, companies planning to set up low cost hotels find their projects trapped. ------------------------------------------------ For More Real Estate News visit http://www.indianground.com/news.html source:\\http:\\www.ndtvprofit.com Add to Google