NEW DELHI
Need a hotel room in India? Better book early and bring big bucks.
As the nation’s economy booms, foreigners and newly affluent Indians are flocking to the country’s big cities in unprecedented numbers but are finding a shortage of places to stay.
“We had to scramble. We practically begged to get a room,” said Danny Leiber, a Los Angeles businessman who had flown to New Delhi on short notice for a “big deal — we’re talking multimillion dollars.”
Begging worked well for Mr. Leiber, who scored a room at New Delhi’s elegant Oberoi Hotel. The price: $450 a night.
Bombay, Bangalore and New Delhi in particular have a shortage of midrange hotels. Soaring urban land prices are making it expensive for hotel chains to expand. When they do, they are building pricier hotels.
Much of the growth is a result of business travel, but tourist numbers also have risen.
Sheraton, Hilton and Holiday Inn are already here. Four Seasons, Accor and Pan Pacific say they are coming, but not fast enough, it seems.
India “immediately needs another 100,000 rooms” — more than double the current number — said Lalit Suri, the chairman and managing director of India’s Bharat Hotels. He estimated that would require investment of up to $17.4 billion.
What India gets will fall short of that.
A total of 300 hotel projects have been approved by the government and are in varying stages of development, said Amitabh Kant, a Tourism Ministry official. Most are likely to be completed in the next three years and should increase capacity by about 75,000 rooms, he said.
Nearly half of the new projects are luxury hotels, and account for about $1.58 billion in investment, said Subhash Goyal, chairman of the Indian Association of Tour Operators. He was not able to provide figures for total investment in the hotel sector.
That means high prices and low availability are expected to continue for the foreseeable future, and worsen at key events such as the Commonwealth Games in 2010 and the cricket World Cup in 2011.
Foreign hotel operators are eager to invest, helped by changes in Indian law in recent years that allow full foreign ownership of hotels.
“The timing is excellent,” said Scott Woroch, a senior vice president of Canada’s Four Seasons Hotels and Resorts, which plans to open its first hotel in Bombay next year in a partnership with the India’s Magnus Hotel group.
“There is a growing demand with respect to international visits to key urban and resort destinations,” he said.
Four Seasons also is “looking at a number of opportunities in New Delhi and Bangalore” and studying prospects in Goa to the south and Rajasthan in the northwest, he said.
The Sheraton Group is collaborating with the Indian Tobacco Co. in running 10 luxury hotels across the country for more than a decade and also is looking to expand.
“We believe that India has very strong growth potential, across all our brands,” said Hwee Peng Yeo, a spokesman for Starwood Asia Pacific Hotels & Resorts Pvt. Ltd., part of the Sheraton Group.
Analysts say the skyrocketing price of land in Indian cities is keeping more projects from getting under way.
For example, a 2.5-acre plot for building a hotel was sold recently for $43.4 million, said R.K. Singh, the Delhi Development Authority’s land commissioner.
By some estimates, those kinds of prices mean that land costs would account for the bulk of building a hotel in India, where materials and labor remain incredibly cheap. The industry standard is for land to account for 15 percent of the cost of a new hotel.
Until a few years ago, hotel rooms were readily available in India’s big cities, and a night in the top establishments tended to run in the $50 to $60 range.
But India’s hotel industry has simply failed to keep up with the country’s hectic economic growth, averaging about 8 percent a year.
Over the past decade, the total number of hotel rooms in all categories — from filthy hostels to opulent resorts — has grown 10 percent to about 92,000.
That has lifted the price of a night in a five-star hotel, which international business travelers tend to use, to an average $325, according to the tour operators association.
Foreign visitor numbers have nearly doubled over the past decade to nearly 4 million, but domestic travel accounts for most of the growth.
With a growing number of wealthy Indians as well as an expanding middle class, the number of Indians traveling within the country has nearly doubled in the past decade to about 350 million, according to the Indian Association of Tour Operators.
Please read our comment policy before commenting.