www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

Research

Contents

Editorial 2

National Capital Region 3

(NCR)

Jaipur 5

Kolkata 7

Mumbai 9

Pune 11

Goa 13

Bangalore 15

Hyderabad 17

Chennai 19

Kochi 21

Conclusion 23

India Hotel ReviewQuarter 2 2007

Executive summary

! Indian hotel sector is on a high growth path with the surge in business as well as leisure

travellers in the country

! Foreign arrivals growing at a steady rate of 11-15% p.a. and are expected to grow

further with increased investment in the tourism sector

! Approximately 30,000 rooms in the premium segment entailing an investment around

Rs.428 billion are expected to come up in the top 10 cites of India

! Significant shortage of rooms across all categories in the country

! Mid-end and budget hotels presenting a potential growth opportunity

! Increased interest by foreign hotel brands and investors

The Oberoi Udaivilas, Udaipur

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Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200702 03

National Capital Region (NCR)

Overview

NCR, including the national capital New Delhi and the satellite towns of Faridabad, Gurgaon, Noida and

Ghaziabad, is a prime economic zone of India. A great historical past, gateway to the northern India hill

stations, excellent national and international connectivity makes the region one of the most favoured

destination for trade, commerce, politics and tourism.

Rapidly improving infrastructure, widespread economic activities, availability of skilled manpower and

decentralisation policy of urban development has triggered off further growth of the NCR. Widening of

national highways and expressways, launch of the Delhi Metro Project and growth of the IT/ITES sector

have also contributed to the boom in the real estate sector which has led to increased business trips to the

capital.

The growth of the industrial and service sector in NCR has led to a surge in demand for star category hotels

and this has had a positive impact on the hospitality business. Besides being a major transitional point for

international and domestic tourists, the region also witnesses an inflow of both business and leisure

travellers. This is unlike other metros, which predominantly host business travellers. Foreign business

travellers form around 70% of the corporate clientele of the hotels in NCR.

EditorialThe economic boom in the country continues unabated. With the GDP of the current fiscal expected to

cross the 9% mark, a consumption boom is sweeping the country, corporate earnings are showing an

impressive growth momentum, new job opportunities continue to unfold salaries and disposable

incomes continue to rise rowth is not just limited to the bigger cities but also permeating to smaller

towns and cities and with rampant urbanisation taking place the real estate sector is riding high.

and

. G

The phenomenal growth of the service sector has had a direct impact on the real estate sector. According to

Knight Frank estimates, close to 100 mn.sq.ft. of office space will be developed in the country over the next

two years, 80% of which will be taken up by the IT/ITES sector. Besides this, approximately

120 mn.sq.ft. of mall space will come up in the market by 2008. Another segment which is benefitting from

the growth of the service sector is the hotel industry. Liberalisation of the Indian economy coupled with the

growth in domestic business and a buoyant economic outlook has led to an enhancement in business travel

in India.

According to Government of India estimates, the foreign arrivals in India increased by 11% between 2004

and 2005 and by 15% between 2005 and 2006. More than 50% of this number are foreign business

travellers. Besides this, approximately 300 million domestic travellers traverse the country each year and this

number is expected to witness a growth of 10-15% over the next few years. Also, the efforts made by the

Ministry of Tourism & Culture in the last few years have had a salutary effect on India's tourism industry.

As per a survey undertaken by an international travel magazine in 2006, India has been ranked as the

4th most favoured country for holidays, above South Africa and Switzerland. Coupled with this, availability

of low cost medical facilities and the introduction of low cost airlines are all expected to generate increased

demand for hotel rooms across many cities in India.

A study done by Knight Frank India indicates that, currently there are close to 31,000 rooms across the

five-star deluxe, five-star, four-star and categories in the cities of NCR, Jaipur, Kolkata, Mumbai,

Pune, Goa, Bangalore, Hyderabad, Chennai and Kochi. Besides this, about 30,000 new rooms in the same

categories are in planning or under-construction stage in the aforesaid cities and will be ready by 2008-09.

The study also revealed that in 2006, the average occupancy rate across these ten cities in the mentioned

categories was 74.5% and the Average Room Rate was about Rs.7,800. About 75% of the total guests

were domestic while the rest were foreigners. Also, approximately 60% of the total guests coming to these

hotels are business travellers. The ARR realised from the business travellers was normally higher than those

from leisure travellers.

According to estimates there are close to 110,000 hotel rooms across all categories in India. This number is

abysmally low when compared to other countries of the world - China has 10 times more and United States

40 times more. Even New York metropolitan region has as many rooms as all of India. Hotel sector in India

has failed to keep up with the exponential economic growth and there exists a substantial demand-supply

gap. The result has been high room rates and low availability across major cities in India. There is an

immediate requirement of approximately 100,000 new hotel rooms but only 75% of that demand will be

met by the projects that are currently underway. Hospitality sector needs to be given a shot in the arm by

the government as well as by the private sector. There is a dire need for providing incentives like raising

Floor Area Ratio (FAR), providing land at subsidised rates, developing rooms in the mid and the budget

segment, etc. so as to facilitate the growth of this key sector.

heritage

(ARR)

Source: Knight Frank Research

Figure 3

10,000

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 4

85

80

75

70

65

60

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

Current Scenario

Over the last few years, tourism in NCR has grown to include heritage tourism, adventure tourism, medical

tourism and eco-tourism. Various segments, including the domestic as well as international corporate

travellers, bureaucrats, sportsmen as well as transitional tourists are the main clientele for the hospitality

sector.

Healthy industrial growth and better infrastructure, conducive for

trade events, have surged the business traffic, which has accelerated the demand for business hotels.

The current room inventory in all the categories in NCR is around 9,982 of which the premium category

hotels constitute around 85% or 8,532 rooms. The list includes names like ITC Maurya Sheraton,

Shangri-La, Trident and Taj Mahal Palace in the five-star deluxe category, Oberoi, Uppal Orchid and Imperial

Heritage in the five-star category, while the four-star category includes Hotel Janpath and Hotel Kanishka.

Between 2003 and 2005, the average occupancy rate in the NCR hotels grew from 70% to 78%. At

present, the occupancy rate is about 83%. Average Room Rate (ARR) in the region has gradually increased

from Rs.4,200 in 2003 to Rs.5,200 in 2004. However, ARR is expected to grow manifold and touch

Rs.10,000 by end-2007. Room rents contribute almost 60% of the total revenue generated in the hotels

while the Meetings, Incentives, Exhibitions and Conferences (MICE) segment accounts for approximately

15% of the total revenue. The share of Food & Beverage (F&B) sector is limited due to competition from

local restaurants and food chains.

NCR is expected to see many new hotels, service apartments and mixed-use developments over the next

3-4 years. Close to 25 new hotels are coming up in Gurgaon alone. Tie-ups with international players like

with , Emaar with Accor and DLF with Hilton is expected to give a push to the hotel industry

in NCR.

New Delhi, as the nation's capital, regularly hosts various political meets and also contributes to the

demand for hotel rooms in the region.

Hillwood Hyatt

Lemon Tree Hotel, Gurgaon Taj Palace Hotel, New Delhi

Source: Ministry of Tourism

Figure 1

5

4

3

2

1

0

2002

2003

2004

2005

Year

Foreign Arrivals in India

mill

ion

2006

Jaipur4%

Goa3% Pune

17%

Kolkata8%

Mumbai17%

Chennai10%

NCR17%

Kochi4%

Hyderabad10%

Bangalore10%

Distribution of supply by 2008-09

Total Rooms : 30,000

Source: Knight Frank Research

Figure 2

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200702 03

National Capital Region (NCR)

Overview

NCR, including the national capital New Delhi and the satellite towns of Faridabad, Gurgaon, Noida and

Ghaziabad, is a prime economic zone of India. A great historical past, gateway to the northern India hill

stations, excellent national and international connectivity makes the region one of the most favoured

destination for trade, commerce, politics and tourism.

Rapidly improving infrastructure, widespread economic activities, availability of skilled manpower and

decentralisation policy of urban development has triggered off further growth of the NCR. Widening of

national highways and expressways, launch of the Delhi Metro Project and growth of the IT/ITES sector

have also contributed to the boom in the real estate sector which has led to increased business trips to the

capital.

The growth of the industrial and service sector in NCR has led to a surge in demand for star category hotels

and this has had a positive impact on the hospitality business. Besides being a major transitional point for

international and domestic tourists, the region also witnesses an inflow of both business and leisure

travellers. This is unlike other metros, which predominantly host business travellers. Foreign business

travellers form around 70% of the corporate clientele of the hotels in NCR.

EditorialThe economic boom in the country continues unabated. With the GDP of the current fiscal expected to

cross the 9% mark, a consumption boom is sweeping the country, corporate earnings are showing an

impressive growth momentum, new job opportunities continue to unfold salaries and disposable

incomes continue to rise rowth is not just limited to the bigger cities but also permeating to smaller

towns and cities and with rampant urbanisation taking place the real estate sector is riding high.

and

. G

The phenomenal growth of the service sector has had a direct impact on the real estate sector. According to

Knight Frank estimates, close to 100 mn.sq.ft. of office space will be developed in the country over the next

two years, 80% of which will be taken up by the IT/ITES sector. Besides this, approximately

120 mn.sq.ft. of mall space will come up in the market by 2008. Another segment which is benefitting from

the growth of the service sector is the hotel industry. Liberalisation of the Indian economy coupled with the

growth in domestic business and a buoyant economic outlook has led to an enhancement in business travel

in India.

According to Government of India estimates, the foreign arrivals in India increased by 11% between 2004

and 2005 and by 15% between 2005 and 2006. More than 50% of this number are foreign business

travellers. Besides this, approximately 300 million domestic travellers traverse the country each year and this

number is expected to witness a growth of 10-15% over the next few years. Also, the efforts made by the

Ministry of Tourism & Culture in the last few years have had a salutary effect on India's tourism industry.

As per a survey undertaken by an international travel magazine in 2006, India has been ranked as the

4th most favoured country for holidays, above South Africa and Switzerland. Coupled with this, availability

of low cost medical facilities and the introduction of low cost airlines are all expected to generate increased

demand for hotel rooms across many cities in India.

A study done by Knight Frank India indicates that, currently there are close to 31,000 rooms across the

five-star deluxe, five-star, four-star and categories in the cities of NCR, Jaipur, Kolkata, Mumbai,

Pune, Goa, Bangalore, Hyderabad, Chennai and Kochi. Besides this, about 30,000 new rooms in the same

categories are in planning or under-construction stage in the aforesaid cities and will be ready by 2008-09.

The study also revealed that in 2006, the average occupancy rate across these ten cities in the mentioned

categories was 74.5% and the Average Room Rate was about Rs.7,800. About 75% of the total guests

were domestic while the rest were foreigners. Also, approximately 60% of the total guests coming to these

hotels are business travellers. The ARR realised from the business travellers was normally higher than those

from leisure travellers.

According to estimates there are close to 110,000 hotel rooms across all categories in India. This number is

abysmally low when compared to other countries of the world - China has 10 times more and United States

40 times more. Even New York metropolitan region has as many rooms as all of India. Hotel sector in India

has failed to keep up with the exponential economic growth and there exists a substantial demand-supply

gap. The result has been high room rates and low availability across major cities in India. There is an

immediate requirement of approximately 100,000 new hotel rooms but only 75% of that demand will be

met by the projects that are currently underway. Hospitality sector needs to be given a shot in the arm by

the government as well as by the private sector. There is a dire need for providing incentives like raising

Floor Area Ratio (FAR), providing land at subsidised rates, developing rooms in the mid and the budget

segment, etc. so as to facilitate the growth of this key sector.

heritage

(ARR)

Source: Knight Frank Research

Figure 3

10,000

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 4

85

80

75

70

65

60

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

Current Scenario

Over the last few years, tourism in NCR has grown to include heritage tourism, adventure tourism, medical

tourism and eco-tourism. Various segments, including the domestic as well as international corporate

travellers, bureaucrats, sportsmen as well as transitional tourists are the main clientele for the hospitality

sector.

Healthy industrial growth and better infrastructure, conducive for

trade events, have surged the business traffic, which has accelerated the demand for business hotels.

The current room inventory in all the categories in NCR is around 9,982 of which the premium category

hotels constitute around 85% or 8,532 rooms. The list includes names like ITC Maurya Sheraton,

Shangri-La, Trident and Taj Mahal Palace in the five-star deluxe category, Oberoi, Uppal Orchid and Imperial

Heritage in the five-star category, while the four-star category includes Hotel Janpath and Hotel Kanishka.

Between 2003 and 2005, the average occupancy rate in the NCR hotels grew from 70% to 78%. At

present, the occupancy rate is about 83%. Average Room Rate (ARR) in the region has gradually increased

from Rs.4,200 in 2003 to Rs.5,200 in 2004. However, ARR is expected to grow manifold and touch

Rs.10,000 by end-2007. Room rents contribute almost 60% of the total revenue generated in the hotels

while the Meetings, Incentives, Exhibitions and Conferences (MICE) segment accounts for approximately

15% of the total revenue. The share of Food & Beverage (F&B) sector is limited due to competition from

local restaurants and food chains.

NCR is expected to see many new hotels, service apartments and mixed-use developments over the next

3-4 years. Close to 25 new hotels are coming up in Gurgaon alone. Tie-ups with international players like

with , Emaar with Accor and DLF with Hilton is expected to give a push to the hotel industry

in NCR.

New Delhi, as the nation's capital, regularly hosts various political meets and also contributes to the

demand for hotel rooms in the region.

Hillwood Hyatt

Lemon Tree Hotel, Gurgaon Taj Palace Hotel, New Delhi

Source: Ministry of Tourism

Figure 1

5

4

3

2

1

0

2002

2003

2004

2005

Year

Foreign Arrivals in India

mill

ion

2006

Jaipur4%

Goa3% Pune

17%

Kolkata8%

Mumbai17%

Chennai10%

NCR17%

Kochi4%

Hyderabad10%

Bangalore10%

Distribution of supply by 2008-09

Total Rooms : 30,000

Source: Knight Frank Research

Figure 2

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200704 05

With the upcoming Commonwealth Games to be held in New Delhi in 2010, NCR is expected to witness

the inflow of around 0.8 million international tourists and nearly 3.6 million domestic tourists. To

accommodate these visitors approximately 30,000 rooms will be required in 2010. Around 6-8 hotels have

been additionally planned for athletes in the Games Village, in the vicinity of the Commonwealth Games

site in East Delhi.

Due to the availability of larger land parcels and proximity to expressways and ring roads, new hotels are

coming up in the peripheral locations of the city. Majority of the new supply is coming up in the business

hubs of Gurgaon and Noida. In the next couple of years, Noida will have additional 24 hotel projects. Once

the upcoming Medicity at Gurgaon is operational, the location will become a global health-care destination

and this will further give a boost to the demand for hotel rooms. Knight Frank Research indicates that over

the next few years, the supply of hotel rooms in NCR will cross 17,500. Out of this, around 5,100 rooms

are currently under construction and the rest in planning stages at various locations around the region.

To meet the long-stay demand from the corporate segment, service apartments have mushroomed in the

NCR at a frenzied pace. According to Knight Frank Research, approximately 1,000 service apartments will

be available in the region by 2008. Among the local developers, Enkay was the first developer to initiate this

concept in New Delhi. Major hotels groups like Marriott, Oberoi, Oakwood, Westin, Leela, Claridges and

Crowne Plaza are also planning service apartments in NCR. Besides these, many smaller and unbranded

service apartments are also coming up in Gurgaon and Noida. These also clock a year-round occupancy

and an average stay of 2.5 to 3 weeks, reflecting the high demand for such developments.

Due to high land cost and with a view to mitigate risk, the concept of hotels in malls is also flourishing.

Budget hotels in malls which offer shopping experience with entertainment facilities under one roof are

eliciting attention from various hospitality players. An upcoming five-star hotel in East End Mall in

Ghaziabad is one such example.

Entry of international brands and players, international events and multi-national companies setting up and

expanding operations has driven the growth of hospitality business in NCR. Soaring land prices and

substantial initial investment are no longer the deterrents for this sector. Due to encouraging government

policies like entitlement to duty-free imports floated by the government, the segment has availed

considerable capital in the market. Recent transactions while auctioning the hotel plots, at prices which are

three-fold of the reserved prices, show growing interest of investors in the region.

A five-year tax holiday announced in the recent budget by the Finance Ministry for two, three and four-star

hotels and convention centres specifically catering to the Commonwealth Games in Delhi, Gurgaon,

Ghaziabad and Faridabad is expected to initiate more hotel groups to venture into this real estate segment.

With the advent of international players, the NCR market is expected to grow towards global standards.

Public private sector initiatives, undertaken in joint venture with developers like Unitech and Parsvanath, in

order to promote entertainment and tourism industry along with infrastructure development in a diversified

quantum has set the region to witness growth in the hospitality sector in the forthcoming years.

Outlook

Jaipur

Overview

Jaipur, the capital of the state of Rajasthan, is a growing business centre of North India. The city offers an

array of attractions ranging from historical monuments and palaces, parks and gardens, gems and jewellery

business to emerging IT/ITES destination. The city's age-old charm along with growing modernisation

makes it an interesting package for a traveller.

Together with the north Indian cities of Delhi and Agra, Jaipur is the third city of the 'Golden Triangle'. It has

been one of the key tourist destinations of India and has the unique flavour of traditional hospitality of the

regal empire. Excellent connectivity to New Delhi through rail, road and air has cemented Jaipur's position

as a leading tourist location of the country.

In the last 2-3 years, Jaipur has undergone substantial changes which have altered the real estate landscape

of the city. Low operational costs, availability of labour at economical rates, low attrition rates due to lack of

regional competition have induced many IT/ITES companies to explore the city. As a result, the residential,

office and retail sector real estate have seen unprecedented growth. Large-scale projects like the Mahindra

& Mahindra SEZ, Vatika City, Pearl City, Omaxe City and many other corporate parks and malls are being

developed around the city.

Source: Knight Frank Research

Figure 5

10,000

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

12,000

Minimum Maximum

Source: Knight Frank Research

Figure 6

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 7

70

65

60

55

50

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

Current Scenario

Major demand drivers for the hospitality sector in Jaipur are heritage tourism and cultural tourism. Festivals

like Dusshehra, Pushkar Mela and Diwali take place in October and November and these months comprise

the peak season for tourist arrivals. Around 67% of the total tourists coming to the city are international

travellers whereas domestic travellers constitute 33%. The government has taken positive steps to promote

tourism and to bridge the gap between demand and supply for tourist amenities including accommodation

and leisure activities.

Penetration of the IT industry in Jaipur has given fillip to business tourism as well. A demand for business

hotels with facilities such as convention halls equipped with presentation equipments, board rooms and

lounges has been observed in the city. Jaipur has also been a favourite destination for marriages and theme

parties and this also contributes to substantial room demand during the period September to March.

The total inventory of the hotel segment in Jaipur in all the categories is about 2,655 rooms. Of this,

approximately 1,144 are in the five and five-star deluxe category, 352 in the four-star category and around

367 rooms in the heritage category. Some of the major hotels include Hotel Rambagh Palace (Bhawani

Singh Road), Le Meridian (Delhi Road), Rajputana Palace Sheraton (near the railway station) and

Country Inns & Suites (MI Road) in the five-star and five-star deluxe category, Hotel Gold Palace & Resorts

(Delhi Road) and Fortune's Bella Casa (Ashram Marg, Tonk Road) in the four-star category and Raj Mahal

Palace (Sardar Patel Marg), Raj Palace (Amer Road) in the heritage category.

The occupancy levels that were around 61% in 2004, increased to 63% in 2005 and to about 65% in 2006.

Significantly, Hotel Jai Mahal Palace enjoyed the highest occupancy rate of 72% i .

It is expected that the occupancy rates for hotels in Jaipur will continue to move upwards as the clientele

from the corporate sector is expected to increase.

n December 2006

The Gold Palace and Resorts, Amer Road Rambagh Palace, Bhavani Singh Road

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200704 05

With the upcoming Commonwealth Games to be held in New Delhi in 2010, NCR is expected to witness

the inflow of around 0.8 million international tourists and nearly 3.6 million domestic tourists. To

accommodate these visitors approximately 30,000 rooms will be required in 2010. Around 6-8 hotels have

been additionally planned for athletes in the Games Village, in the vicinity of the Commonwealth Games

site in East Delhi.

Due to the availability of larger land parcels and proximity to expressways and ring roads, new hotels are

coming up in the peripheral locations of the city. Majority of the new supply is coming up in the business

hubs of Gurgaon and Noida. In the next couple of years, Noida will have additional 24 hotel projects. Once

the upcoming Medicity at Gurgaon is operational, the location will become a global health-care destination

and this will further give a boost to the demand for hotel rooms. Knight Frank Research indicates that over

the next few years, the supply of hotel rooms in NCR will cross 17,500. Out of this, around 5,100 rooms

are currently under construction and the rest in planning stages at various locations around the region.

To meet the long-stay demand from the corporate segment, service apartments have mushroomed in the

NCR at a frenzied pace. According to Knight Frank Research, approximately 1,000 service apartments will

be available in the region by 2008. Among the local developers, Enkay was the first developer to initiate this

concept in New Delhi. Major hotels groups like Marriott, Oberoi, Oakwood, Westin, Leela, Claridges and

Crowne Plaza are also planning service apartments in NCR. Besides these, many smaller and unbranded

service apartments are also coming up in Gurgaon and Noida. These also clock a year-round occupancy

and an average stay of 2.5 to 3 weeks, reflecting the high demand for such developments.

Due to high land cost and with a view to mitigate risk, the concept of hotels in malls is also flourishing.

Budget hotels in malls which offer shopping experience with entertainment facilities under one roof are

eliciting attention from various hospitality players. An upcoming five-star hotel in East End Mall in

Ghaziabad is one such example.

Entry of international brands and players, international events and multi-national companies setting up and

expanding operations has driven the growth of hospitality business in NCR. Soaring land prices and

substantial initial investment are no longer the deterrents for this sector. Due to encouraging government

policies like entitlement to duty-free imports floated by the government, the segment has availed

considerable capital in the market. Recent transactions while auctioning the hotel plots, at prices which are

three-fold of the reserved prices, show growing interest of investors in the region.

A five-year tax holiday announced in the recent budget by the Finance Ministry for two, three and four-star

hotels and convention centres specifically catering to the Commonwealth Games in Delhi, Gurgaon,

Ghaziabad and Faridabad is expected to initiate more hotel groups to venture into this real estate segment.

With the advent of international players, the NCR market is expected to grow towards global standards.

Public private sector initiatives, undertaken in joint venture with developers like Unitech and Parsvanath, in

order to promote entertainment and tourism industry along with infrastructure development in a diversified

quantum has set the region to witness growth in the hospitality sector in the forthcoming years.

Outlook

Jaipur

Overview

Jaipur, the capital of the state of Rajasthan, is a growing business centre of North India. The city offers an

array of attractions ranging from historical monuments and palaces, parks and gardens, gems and jewellery

business to emerging IT/ITES destination. The city's age-old charm along with growing modernisation

makes it an interesting package for a traveller.

Together with the north Indian cities of Delhi and Agra, Jaipur is the third city of the 'Golden Triangle'. It has

been one of the key tourist destinations of India and has the unique flavour of traditional hospitality of the

regal empire. Excellent connectivity to New Delhi through rail, road and air has cemented Jaipur's position

as a leading tourist location of the country.

In the last 2-3 years, Jaipur has undergone substantial changes which have altered the real estate landscape

of the city. Low operational costs, availability of labour at economical rates, low attrition rates due to lack of

regional competition have induced many IT/ITES companies to explore the city. As a result, the residential,

office and retail sector real estate have seen unprecedented growth. Large-scale projects like the Mahindra

& Mahindra SEZ, Vatika City, Pearl City, Omaxe City and many other corporate parks and malls are being

developed around the city.

Source: Knight Frank Research

Figure 5

10,000

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

12,000

Minimum Maximum

Source: Knight Frank Research

Figure 6

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 7

70

65

60

55

50

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

Current Scenario

Major demand drivers for the hospitality sector in Jaipur are heritage tourism and cultural tourism. Festivals

like Dusshehra, Pushkar Mela and Diwali take place in October and November and these months comprise

the peak season for tourist arrivals. Around 67% of the total tourists coming to the city are international

travellers whereas domestic travellers constitute 33%. The government has taken positive steps to promote

tourism and to bridge the gap between demand and supply for tourist amenities including accommodation

and leisure activities.

Penetration of the IT industry in Jaipur has given fillip to business tourism as well. A demand for business

hotels with facilities such as convention halls equipped with presentation equipments, board rooms and

lounges has been observed in the city. Jaipur has also been a favourite destination for marriages and theme

parties and this also contributes to substantial room demand during the period September to March.

The total inventory of the hotel segment in Jaipur in all the categories is about 2,655 rooms. Of this,

approximately 1,144 are in the five and five-star deluxe category, 352 in the four-star category and around

367 rooms in the heritage category. Some of the major hotels include Hotel Rambagh Palace (Bhawani

Singh Road), Le Meridian (Delhi Road), Rajputana Palace Sheraton (near the railway station) and

Country Inns & Suites (MI Road) in the five-star and five-star deluxe category, Hotel Gold Palace & Resorts

(Delhi Road) and Fortune's Bella Casa (Ashram Marg, Tonk Road) in the four-star category and Raj Mahal

Palace (Sardar Patel Marg), Raj Palace (Amer Road) in the heritage category.

The occupancy levels that were around 61% in 2004, increased to 63% in 2005 and to about 65% in 2006.

Significantly, Hotel Jai Mahal Palace enjoyed the highest occupancy rate of 72% i .

It is expected that the occupancy rates for hotels in Jaipur will continue to move upwards as the clientele

from the corporate sector is expected to increase.

n December 2006

The Gold Palace and Resorts, Amer Road Rambagh Palace, Bhavani Singh Road

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

ARR values have increased by 27% during 2005 to around Rs.6,500 from Rs.5,100 reported in 2004.

Hotel Raj Vilas recorded the highest ARR of Rs.15,332 for the year 2006 while overall the premium category

hotels in Jaipur achieved an ARR of around Rs.7,200 in the same year. The demand supply imbalance

observed during the peak season has enabled hotels in Jaipur to charge higher tariffs across market

segments. With a nominal 3-4% p.a. increase in supply, ARR is expected to grow at a rate of 25-30% in the

next 2-3 years.

As per industry estimates, 56% of total hotel revenue is generated by room rents whereas F&B contributes

26% and convention and banquet halls each contribute approximately 8%. Due to the presence of

organised tour and travel operators, the international airport and introduction of new tourist attraction

concepts like Elephant Safari (Haathi Gaon), the city is bound to witness growth from budget to

premium-end clientele in hotel segment.

Strengthening of Jaipur as major tourist destination and a potential destination for business travellers has

induced foreign players like Amanda, Satinwoods, Banana Tree, Hampton Inns, Hilton and Mandarin

Oriental to consider the city for setting up new hotel projects. Hyatt has Jaipur on its priority list for

establishing its resort as well.

Other players like Mahindra Group is developing a five-star hotel while InterGlobe, in a joint venture with

Accor, is setting up a 500-room budget hotel in Jaipur, which will be operational by 2008. The construction

for another budget hotel by The Lemon Tree has already started at World Trade Park on Jawaharlal Nehru

Marg in Jaipur. An International Convention Centre is proposed in the city and is to come up within the

next 18 months. A distinct market of hotel-cum-mall segment is also emerging in the city. Fortune Group's

Bella Cassa, with an inventory of 57 rooms has been developed on the same concept.

Out of the Rs.200 billion investment envisaged in Rajasthan, Jaipur is expected to receive a major share

which will be invested for improving social infrastructure and amenities within the city. Better connectivity

to the city on account of low-cost airlines has led to increased consideration of the city as a venue for

conventions and marriages. It will further augment the share of room revenue in the total revenue

generation pie and also create new demand for rooms.

The New Hotel Policy 2006 gives special provisions for development of hotels in Jaipur. The policy includes

reservation of land parcels for hotel projects within the city, availability of hotels plots at a dropped reserved

price (almost 50% of commercial reserved price), 100% exemption on entertainment tax and 100%

exemption from land conversion charges. All these provisions are expected to increase the supply of hotels

in the city. Delhi Road due to the development of industrial parks, Ajmer Road on account of development

of integrated townships and SEZs and Tonk Road owing to new commercial developments, will be

emerging destinations for new hotel projects.

Jaipur, with its historical charm, will continue to attract international tourists and reap profits on the

growing hospitality business. With the city emerging as a major centre for gems, jewellery and textiles,

increased business for the hospitality segment will be coming in from this commercial segment. However,

a supply of approximately 1,080 rooms over the next few years may create a situation of over-supply in the

Jaipur hospitality market.

Outlook

Kolkata

Overview

Kolkata, the capital of West Bengal is the second largest city of India and an erstwhile trading and

commercial capital of the country. Various industrial set-ups including engineering products, leather, steel,

automobiles and pharmaceutical companies together with banking and insurance companies have had a

significant impact on the economic growth of the city. Kolkata is also the commercial capital of the

north-eastern region with most companies having their regional offices in the city.

The emergence of Kolkata as a popular new economy destination due to its advantages of comparatively

low manpower and real estate costs coupled with the existing industrial set-up have had major impact on

the real estate sector of the city. Geographically, too, the city has grown outward in all the directions with

major development along the eastern, southern as well as western locations. The growth of the IT/ITES

sector in the city is also triggering a growth phase in retail, hotels and residential properties. Kolkata, which

earlier had only a few hotel brands, has seen a change of face with the emergence of the new age

companies in the city.

Connectivity from Kolkata to other Indian and international destinations by air is improving with the

addition of new airlines. As the only metropolitan city for the entire eastern belt of the country, Kolkata has

an extensive network of road and rail transportation facilities.

Source: Knight Frank Research

Figure 8

20,000

15,000

10,000

5,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Heri

tag

e

Category-wise ARR

Rs.

Minimum Maximum

Source: Knight Frank Research

Figure 9

5,000

4,000

3,000

2,000

1,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

6,000

Source: Knight Frank Research

Figure 10

100

60

40

20

0

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

80

06 07

Hyatt Regency, Salt Lake Oberoi Grand, Jawaharlal Nehru Road

Current Scenario

In recent times, the city's booming IT sector has led to the rise in demand for hotel rooms. There has been a

substantial increase in the demand for good quality short-stay accomodation from Indian as well as foreign

executives, as business in the city has improved after a lull of almost two decades. Almost 60-70% of guests

in the premium category are business travellers, with the airline crew contributing another 8-10% to the

total demand. The travellers to the city are mostly domestic but recently the share of international travellers

has gone up and most of the premium category hotels have an average of 40% foreigners as their clientele.

Currently, there are around 25-26 hotels in various categories operating in Kolkata. The current inventory in

the premium category is around 1,476 rooms, which is around 85% of the total rooms in Kolkata. Most of

the hotels like Taj Bengal, Oberoi Grand, Hotel Hindusthan International as well as The Kenilworth Hotel are

located in the CBD and hold the advantage of location and accessibility. Other hotels like Hyatt Regency

Kolkata and ITC Sonar Bangla Sheraton Hotel & Towers in the eastern part of the city, cater to the

upcoming new business sectors along the Salt Lake and Rajarhat stretch.

The occupancy levels in the city hotels have increased at an average annual growth rate of 15-18% since

the last few years. The current average annual occupancy level of the city hovers around 80% and is

expected to remain at the same level for the next two years. Low ARR figures in 2001-03 were steadily

recovered in the last few years due to emergence of the IT/ITES sector, the change in the ARR of a city being

the indicator of the quantum of business activity. The premium category hotels currently have an ARR of

Rs.4,100- 5,500 with five-star deluxe hotels touching around Rs.12,000 in the recent past.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

ARR values have increased by 27% during 2005 to around Rs.6,500 from Rs.5,100 reported in 2004.

Hotel Raj Vilas recorded the highest ARR of Rs.15,332 for the year 2006 while overall the premium category

hotels in Jaipur achieved an ARR of around Rs.7,200 in the same year. The demand supply imbalance

observed during the peak season has enabled hotels in Jaipur to charge higher tariffs across market

segments. With a nominal 3-4% p.a. increase in supply, ARR is expected to grow at a rate of 25-30% in the

next 2-3 years.

As per industry estimates, 56% of total hotel revenue is generated by room rents whereas F&B contributes

26% and convention and banquet halls each contribute approximately 8%. Due to the presence of

organised tour and travel operators, the international airport and introduction of new tourist attraction

concepts like Elephant Safari (Haathi Gaon), the city is bound to witness growth from budget to

premium-end clientele in hotel segment.

Strengthening of Jaipur as major tourist destination and a potential destination for business travellers has

induced foreign players like Amanda, Satinwoods, Banana Tree, Hampton Inns, Hilton and Mandarin

Oriental to consider the city for setting up new hotel projects. Hyatt has Jaipur on its priority list for

establishing its resort as well.

Other players like Mahindra Group is developing a five-star hotel while InterGlobe, in a joint venture with

Accor, is setting up a 500-room budget hotel in Jaipur, which will be operational by 2008. The construction

for another budget hotel by The Lemon Tree has already started at World Trade Park on Jawaharlal Nehru

Marg in Jaipur. An International Convention Centre is proposed in the city and is to come up within the

next 18 months. A distinct market of hotel-cum-mall segment is also emerging in the city. Fortune Group's

Bella Cassa, with an inventory of 57 rooms has been developed on the same concept.

Out of the Rs.200 billion investment envisaged in Rajasthan, Jaipur is expected to receive a major share

which will be invested for improving social infrastructure and amenities within the city. Better connectivity

to the city on account of low-cost airlines has led to increased consideration of the city as a venue for

conventions and marriages. It will further augment the share of room revenue in the total revenue

generation pie and also create new demand for rooms.

The New Hotel Policy 2006 gives special provisions for development of hotels in Jaipur. The policy includes

reservation of land parcels for hotel projects within the city, availability of hotels plots at a dropped reserved

price (almost 50% of commercial reserved price), 100% exemption on entertainment tax and 100%

exemption from land conversion charges. All these provisions are expected to increase the supply of hotels

in the city. Delhi Road due to the development of industrial parks, Ajmer Road on account of development

of integrated townships and SEZs and Tonk Road owing to new commercial developments, will be

emerging destinations for new hotel projects.

Jaipur, with its historical charm, will continue to attract international tourists and reap profits on the

growing hospitality business. With the city emerging as a major centre for gems, jewellery and textiles,

increased business for the hospitality segment will be coming in from this commercial segment. However,

a supply of approximately 1,080 rooms over the next few years may create a situation of over-supply in the

Jaipur hospitality market.

Outlook

Kolkata

Overview

Kolkata, the capital of West Bengal is the second largest city of India and an erstwhile trading and

commercial capital of the country. Various industrial set-ups including engineering products, leather, steel,

automobiles and pharmaceutical companies together with banking and insurance companies have had a

significant impact on the economic growth of the city. Kolkata is also the commercial capital of the

north-eastern region with most companies having their regional offices in the city.

The emergence of Kolkata as a popular new economy destination due to its advantages of comparatively

low manpower and real estate costs coupled with the existing industrial set-up have had major impact on

the real estate sector of the city. Geographically, too, the city has grown outward in all the directions with

major development along the eastern, southern as well as western locations. The growth of the IT/ITES

sector in the city is also triggering a growth phase in retail, hotels and residential properties. Kolkata, which

earlier had only a few hotel brands, has seen a change of face with the emergence of the new age

companies in the city.

Connectivity from Kolkata to other Indian and international destinations by air is improving with the

addition of new airlines. As the only metropolitan city for the entire eastern belt of the country, Kolkata has

an extensive network of road and rail transportation facilities.

Source: Knight Frank Research

Figure 8

20,000

15,000

10,000

5,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Heri

tag

e

Category-wise ARR

Rs.

Minimum Maximum

Source: Knight Frank Research

Figure 9

5,000

4,000

3,000

2,000

1,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

6,000

Source: Knight Frank Research

Figure 10

100

60

40

20

0

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

80

06 07

Hyatt Regency, Salt Lake Oberoi Grand, Jawaharlal Nehru Road

Current Scenario

In recent times, the city's booming IT sector has led to the rise in demand for hotel rooms. There has been a

substantial increase in the demand for good quality short-stay accomodation from Indian as well as foreign

executives, as business in the city has improved after a lull of almost two decades. Almost 60-70% of guests

in the premium category are business travellers, with the airline crew contributing another 8-10% to the

total demand. The travellers to the city are mostly domestic but recently the share of international travellers

has gone up and most of the premium category hotels have an average of 40% foreigners as their clientele.

Currently, there are around 25-26 hotels in various categories operating in Kolkata. The current inventory in

the premium category is around 1,476 rooms, which is around 85% of the total rooms in Kolkata. Most of

the hotels like Taj Bengal, Oberoi Grand, Hotel Hindusthan International as well as The Kenilworth Hotel are

located in the CBD and hold the advantage of location and accessibility. Other hotels like Hyatt Regency

Kolkata and ITC Sonar Bangla Sheraton Hotel & Towers in the eastern part of the city, cater to the

upcoming new business sectors along the Salt Lake and Rajarhat stretch.

The occupancy levels in the city hotels have increased at an average annual growth rate of 15-18% since

the last few years. The current average annual occupancy level of the city hovers around 80% and is

expected to remain at the same level for the next two years. Low ARR figures in 2001-03 were steadily

recovered in the last few years due to emergence of the IT/ITES sector, the change in the ARR of a city being

the indicator of the quantum of business activity. The premium category hotels currently have an ARR of

Rs.4,100- 5,500 with five-star deluxe hotels touching around Rs.12,000 in the recent past.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

Kolkata is becoming a preferred location for conferences and seminars due to the relatively easy availability

of space at a lower cost as compared to other metros. Banqueting facilities in hotels witnessed a booking

level of almost 80% in 2006 with larger demand from the corporate companies as compared to private

functions. Facilities like spas have a good demand in Kolkata as five-star deluxe hotels like the

Hyatt Regency, ITC Sonar Bangla as well as Oberoi Grand have exquisite spa facilities, most of them catering

to in-house guests as well as local residents.

Tourism takes a backseat in the room demand for hotels, as this segment in Kolkata is fairly seasonal. A

minimal 20% of the demand can be attributed to foreign as well as domestic tourists in Kolkata. While

rooms in the premium category contribute to almost 62% of the net revenue, the MICE segment contribute

almost 15% of the net revenue generated in hotels in Kolkata.

The horizontal expansion of the city limits in the eastern and north-eastern part of Kolkata, including

Rajarhat and Salt Lake, has seen many global IT companies setting up operations here. The proximity to the

airport, availability of large land parcels and upcoming industrial set-ups has fuelled the demand for hotels

to be located in this region. According to industry experts, Kolkata will witness a new supply of around

2,000-2,200 rooms of which approximately 80% will come up in this region.

At least 12 new hotels and serviced apartments will be entering the Kolkata market over the next few years.

While few hotels like The Ffort Radisson have expansion plans within their current facility, hotels chains like

Intercontinental Group, Marriott Hotels and Resorts, Hilton Group, Peerless Group, Sarovar Hotels, as well as

DLF in joint venture with Dubai-based Emaar Group are setting up five-star and five-star deluxe properties in

the city. On the other hand, hotels like Grand Great Eastern Hotel as well as MBD Airport Hotel are currently

under renovation and are expected to add to the upcoming supply of rooms.

The service apartment segment in Kolkata has still not been explored, but as the market matures, the

demand for medium to long-term stay options would increase. The continual demand from the IT/ITES

segment together with the manufacturing and processing industry will further strengthen the demand for

this segment in Kolkata. Few hotel groups like Intercontinental Group too have plans to set up service

apartments in Rajarhat. The concept of mall hotel, combining a star category hotel within a mall and

multiplex, was initiated with a 130-room star hotel at City Centre Mall, at Rajarhat.

Kolkata is currently undergoing an economic resurgence with the West Bengal government providing

aggressive incentive packed steps to attract investments. The government has identified IT as a priority

sector to be developed into a growth engine for the future. With its improving infrastructure, low cost of

operations and a proactive state government, Kolkata is well positioned to benefit from this growth in ITES

services. The promotion of large-scale IT and non-IT industries in West Bengal will further enhance the

demand for hotel rooms. Also large townships in various parts of the city planned by the government, in

joint venture with developers, have hotels within their projects.

Outlook

Mumbai

Overview

Mumbai, the capital city of state of Maharashtra, is a commercial megalopolis and also the financial capital

of the country. The city comprises an archipelago of seven islands amalgamated with the northern lands to

form down town South Mumbai, North Mumbai with suburbs, Navi Mumbai and Thane. Being well

connected to key global cities makes Mumbai a gateway to India.

Besides port related trade activities, Mumbai has also been the entertainment capital of India. Important

financial institutions like the Reserve Bank of India, the Bombay Stock Exchange, the National Stock

Exchange and the headquarters of many Indian corporates including a number of FMCG corporates are

located in Mumbai. It is also an important location for multi-national companies entering the Indian market.

Hospitality industry in Mumbai, based on the business mix, can be distinctly divided into two districts,

viz. South Mumbai and North Mumbai. South Mumbai hotels like Oberoi, Taj Mahal Palace & Tower,

Intercontinental The Grand, Taj President and Marine Plaza operate on a healthy mix of 20% of leisure

travellers and 80% of business travellers visiting the business districts of Nariman point, Fort, Ballard Estate

and Colaba. On the contrary, North Mumbai hotels like Grand Hyatt at Santacruz located close to the

domestic airport, The Leela Kempinski and ITC Grand Maratha in the vicinity of the international airport at

Andheri, Taj Lands End at Bandra as well as JW Marriott at Juhu cater chiefly to the corporate travellers.

These hotels operate on a business mix of airline crew (7-10%) and business travellers (90%) visiting the

Suburban Business Districts (SBD) of Bandra-Kurla, Andheri-Powai, Goregaon-Malad and the Peripheral

Business District (PBD) of Navi-Mumbai.

Source: Knight Frank Research

Figure 12

10,000

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 13

75

70

65

60

2003

2004

2005

Year

Occupancy RatePerc

en

t

2006

80

Source: Knight Frank Research

Figure 11

10,000

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

Minimum Maximum

08 09

JW Marriott, Juhu Taj Mahal Palace and Tower, Apollo Bunder

Current Scenario

Over the past year, approximately 40% of the estimated 4.4 million foreign arrivals to India visited Mumbai.

According to the Municipal Corporation of Greater Mumbai, the city has a floating population in the range

of 3-5 million, a large share of which is contributed by business travellers. Over the last 3 years, premium

hotels in Mumbai have witnessed healthy occupancy rates crossing 65%, which rose marginally to 72% in

2006. However, according to industry sources, Mumbai experienced a dip of about 10% in the months of

July and August in 2006, which can be attributed to the bomb blasts and heavy deluge in the city.

In 2006 the city's annual ARR in the premium category was Rs.8,942. North Mumbai hotels recorded ARR in

the range of Rs.5,832-11,000 and an average occupancy level of 72%. In comparison, South Mumbai

hotels achieved an annual ARR in range of Rs.7,339-10,652 with an exception of a heritage hotel which

touched a high of Rs.15,000. In the same period, the average annual occupancy level for South Mumbai

hotels was 71%.

The revenue share distribution across premium as well as four-star category of hotels in Mumbai city can be

broadly divided as 65-75% being generated from room revenue, 20-35% from F&B on account of

house-guests, walk-in head covers and banqueting while around 2-5% is generated from the miscellaneous

segment.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

Kolkata is becoming a preferred location for conferences and seminars due to the relatively easy availability

of space at a lower cost as compared to other metros. Banqueting facilities in hotels witnessed a booking

level of almost 80% in 2006 with larger demand from the corporate companies as compared to private

functions. Facilities like spas have a good demand in Kolkata as five-star deluxe hotels like the

Hyatt Regency, ITC Sonar Bangla as well as Oberoi Grand have exquisite spa facilities, most of them catering

to in-house guests as well as local residents.

Tourism takes a backseat in the room demand for hotels, as this segment in Kolkata is fairly seasonal. A

minimal 20% of the demand can be attributed to foreign as well as domestic tourists in Kolkata. While

rooms in the premium category contribute to almost 62% of the net revenue, the MICE segment contribute

almost 15% of the net revenue generated in hotels in Kolkata.

The horizontal expansion of the city limits in the eastern and north-eastern part of Kolkata, including

Rajarhat and Salt Lake, has seen many global IT companies setting up operations here. The proximity to the

airport, availability of large land parcels and upcoming industrial set-ups has fuelled the demand for hotels

to be located in this region. According to industry experts, Kolkata will witness a new supply of around

2,000-2,200 rooms of which approximately 80% will come up in this region.

At least 12 new hotels and serviced apartments will be entering the Kolkata market over the next few years.

While few hotels like The Ffort Radisson have expansion plans within their current facility, hotels chains like

Intercontinental Group, Marriott Hotels and Resorts, Hilton Group, Peerless Group, Sarovar Hotels, as well as

DLF in joint venture with Dubai-based Emaar Group are setting up five-star and five-star deluxe properties in

the city. On the other hand, hotels like Grand Great Eastern Hotel as well as MBD Airport Hotel are currently

under renovation and are expected to add to the upcoming supply of rooms.

The service apartment segment in Kolkata has still not been explored, but as the market matures, the

demand for medium to long-term stay options would increase. The continual demand from the IT/ITES

segment together with the manufacturing and processing industry will further strengthen the demand for

this segment in Kolkata. Few hotel groups like Intercontinental Group too have plans to set up service

apartments in Rajarhat. The concept of mall hotel, combining a star category hotel within a mall and

multiplex, was initiated with a 130-room star hotel at City Centre Mall, at Rajarhat.

Kolkata is currently undergoing an economic resurgence with the West Bengal government providing

aggressive incentive packed steps to attract investments. The government has identified IT as a priority

sector to be developed into a growth engine for the future. With its improving infrastructure, low cost of

operations and a proactive state government, Kolkata is well positioned to benefit from this growth in ITES

services. The promotion of large-scale IT and non-IT industries in West Bengal will further enhance the

demand for hotel rooms. Also large townships in various parts of the city planned by the government, in

joint venture with developers, have hotels within their projects.

Outlook

Mumbai

Overview

Mumbai, the capital city of state of Maharashtra, is a commercial megalopolis and also the financial capital

of the country. The city comprises an archipelago of seven islands amalgamated with the northern lands to

form down town South Mumbai, North Mumbai with suburbs, Navi Mumbai and Thane. Being well

connected to key global cities makes Mumbai a gateway to India.

Besides port related trade activities, Mumbai has also been the entertainment capital of India. Important

financial institutions like the Reserve Bank of India, the Bombay Stock Exchange, the National Stock

Exchange and the headquarters of many Indian corporates including a number of FMCG corporates are

located in Mumbai. It is also an important location for multi-national companies entering the Indian market.

Hospitality industry in Mumbai, based on the business mix, can be distinctly divided into two districts,

viz. South Mumbai and North Mumbai. South Mumbai hotels like Oberoi, Taj Mahal Palace & Tower,

Intercontinental The Grand, Taj President and Marine Plaza operate on a healthy mix of 20% of leisure

travellers and 80% of business travellers visiting the business districts of Nariman point, Fort, Ballard Estate

and Colaba. On the contrary, North Mumbai hotels like Grand Hyatt at Santacruz located close to the

domestic airport, The Leela Kempinski and ITC Grand Maratha in the vicinity of the international airport at

Andheri, Taj Lands End at Bandra as well as JW Marriott at Juhu cater chiefly to the corporate travellers.

These hotels operate on a business mix of airline crew (7-10%) and business travellers (90%) visiting the

Suburban Business Districts (SBD) of Bandra-Kurla, Andheri-Powai, Goregaon-Malad and the Peripheral

Business District (PBD) of Navi-Mumbai.

Source: Knight Frank Research

Figure 12

10,000

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 13

75

70

65

60

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

80

Source: Knight Frank Research

Figure 11

10,000

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

Minimum Maximum

08 09

JW Marriott, Juhu Taj Mahal Palace and Tower, Apollo Bunder

Current Scenario

Over the past year, approximately 40% of the estimated 4.4 million foreign arrivals to India visited Mumbai.

According to the Municipal Corporation of Greater Mumbai, the city has a floating population in the range

of 3-5 million, a large share of which is contributed by business travellers. Over the last 3 years, premium

hotels in Mumbai have witnessed healthy occupancy rates crossing 65%, which rose marginally to 72% in

2006. However, according to industry sources, Mumbai experienced a dip of about 10% in the months of

July and August in 2006, which can be attributed to the bomb blasts and heavy deluge in the city.

In 2006 the city's annual ARR in the premium category was Rs.8,942. North Mumbai hotels recorded ARR in

the range of Rs.5,832-11,000 and an average occupancy level of 72%. In comparison, South Mumbai

hotels achieved an annual ARR in range of Rs.7,339-10,652 with an exception of a heritage hotel which

touched a high of Rs.15,000. In the same period, the average annual occupancy level for South Mumbai

hotels was 71%.

The revenue share distribution across premium as well as four-star category of hotels in Mumbai city can be

broadly divided as 65-75% being generated from room revenue, 20-35% from F&B on account of

house-guests, walk-in head covers and banqueting while around 2-5% is generated from the miscellaneous

segment.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

At present, Mumbai hospitality market has an inventory of around 6,829 rooms in the premium category,

including 404 service apartments. Around 5,150 rooms are coming up in the city by 2010. Increasing

economic and commercial activities in the city are putting a phenomenal upward pressure on the demand

for hotel rooms, leading to a demand-supply gap in the hospitality sector.

Skyrocketing land costs in South and Central Mumbai as well as the movement of business activity to

suburbs and Navi Mumbai has pushed the development of hospitality projects to North Mumbai.

Availability of large land parcels, economy of time and cost due to lesser commute time, proximity to

existing and proposed airports as well as a Quadra modal connectivity to Thane, Panvel, Pune and Nashik

have also been the reasons for extensive hospitality development in North Mumbai. Navi Mumbai too is

poised for considerable hospitality activity beginning with the Park Hotel becoming operational in the

current year. Another six hotels in the budget category are being planned in this micro-market.

Commercial re-development of mill lands in Central Mumbai is likely to add to the supply as well as to the

demand in hospitality sector in Mumbai. Once operational, hotels in this micro-market are likely to gain a

larger share of the business travellers frequenting the city. Four Seasons at Worli as well as High-Street

Phoenix, a part of a large-scale development at Lower Parel, are two prominent developments underway in

Central Mumbai.

Ease in availability of land together with increasing number of companies preferring to set up their

operations in SBD and PBD locations will continue to drive extensive hotel development in these

micro-markets. Moreover, proposed infrastructure projects like Bandra-Worli sea link, Metro Rail and

Nhava-Seva sea link promise enhanced connectivity and hence shall augment hospitality growth in these

corridors. Commencement of the new international airport at Navi-Mumbai leading to increased air

capacity and better connectivity shall also push the demand for hotel accommodation in North Mumbai.

The upsurge in hospitality sector is attracting several developers holding large land banks to foray into the

market by means of management contract tie-ups with hospitality majors. By joining hands with local

developers, global hospitality majors like Accor, Hilton, Four Seasons, IHG, Marriott, and domestic players

like Taj, Park and Sarovar groups are planning a new entry or expansion in the city. In a recent move,

Mumbai based developer Nirmal Lifestyles Group has announced the plans to develop India's largest single

hospitality precinct with around 1,080 hotel rooms spread across five hotels, and a 3,000-seater convention

centre at the central suburb of Mulund.

Corollary to the economic boom in the country, foreign as well as domestic business and leisure travellers

are expected to grow manifold. This will continue to fuel the demand for hotels in Mumbai and favour

strong hospitality sector growth in the medium term.

Outlook

Pune

Overview

Pune is strategically located in the heart of one of the richest industrial belts in Maharashtra. Proximity to

India's financial capital, Mumbai, and the presence of numerous automotive companies had for long been

Pune's claim to fame in the industrial world. Availability of skilled personnel and infrastructure facilities have

also played a major role in attracting industries to Pune. With the promotion of Mumbai-Pune region as a

'knowledge corridor' by Maharashtra government, the IT/ITES sector has also seen a substantial growth in

this city.

With the entry of many Indian and global software players in Pune since 2000, the city has seen around

12-15% per annual increase in foreign and domestic corporate travellers. Hotels of all categories in the city

have witnessed a steady stream of visitors, which has led them to add more services to their list as well as

upgrade their existing ones.

Source: Knight Frank Research

Figure 15

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 16

100

60

40

20

0

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

80

Source: Knight Frank Research

Figure 14

20,000

15,000

10,000

5,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

Sta

r

Category-wise ARR

Rs.

Minimum Maximum

10 11

Seasons Service Apartments, Aundh

Current Scenario

Currently there are around 28-30 hotels and 4-5 service apartment projects operating in Pune in all

categories. The premium category hotels total to around 1,020 rooms and three-star category to around

375. Most of the hotels strategically located in the central parts of the city have easy access to the airport

and railway station as well as to the industrial units and IT locations of the city. While

Le Meridien and Sun 'n' Sand are located on Bund Garden Road, other five-star hotels like

Best Western Pride and Taj Blue Diamond are located on University Road and Koregaon Road respectively.

Four-star hotels like Central Park, Arora Towers and Sagar Plaza are located in central Pune as well whereas

Ambience Excellency is located in the northern suburbs of Pimpri-Chinchwad. Seasons, a newly launched

service apartment project is located at Aundh in the west while others like Bel-Air are located in eastern

Pune.

The five-star and five-star deluxe hotels comprising around 27% of the existing stock in the city cater to

around 85% of business travellers while the four-star category hotels dominate the market with 37% of the

current stock catering to around 80% of business travellers, the rest being leisure travellers. Presently,

foreign business visitors account for almost 60% of total visitors to the city. The manufacturing and

automobile units in Pimpri-Chinchwad as well Chakan and Ranjangaon Industrial areas contribute to an

average of 55% of the total room demand while the IT sector in the city contributes 45%. The airline transit

crew generates around 2-3% of room nights annually in few four-star hotels.

Hotel in the premium category in Pune observed a marginal decrease in the average occupancy from

approximately 84% in 2005 to 81% in 2006. The average occupancy is expected to remain constant at

around 83-85% for the next few years till the opening of new properties in Pune after which the occupancy

levels may fall by almost 3-5% and remain constant thereafter.

The average room rates for premium category hotels in the city have shown a constant increase by almost

55% annually in the past few years. The ARR achieved by premium hotels in Pune is around Rs.6,800. This

trend is likely to continue for a few years due to limited supply of additional hotel rooms in the market.

five-star deluxe hotels

like

Taj Blue Diamond, Koregaon Road

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

At present, Mumbai hospitality market has an inventory of around 6,829 rooms in the premium category,

including 404 service apartments. Around 5,150 rooms are coming up in the city by 2010. Increasing

economic and commercial activities in the city are putting a phenomenal upward pressure on the demand

for hotel rooms, leading to a demand-supply gap in the hospitality sector.

Skyrocketing land costs in South and Central Mumbai as well as the movement of business activity to

suburbs and Navi Mumbai has pushed the development of hospitality projects to North Mumbai.

Availability of large land parcels, economy of time and cost due to lesser commute time, proximity to

existing and proposed airports as well as a Quadra modal connectivity to Thane, Panvel, Pune and Nashik

have also been the reasons for extensive hospitality development in North Mumbai. Navi Mumbai too is

poised for considerable hospitality activity beginning with the Park Hotel becoming operational in the

current year. Another six hotels in the budget category are being planned in this micro-market.

Commercial re-development of mill lands in Central Mumbai is likely to add to the supply as well as to the

demand in hospitality sector in Mumbai. Once operational, hotels in this micro-market are likely to gain a

larger share of the business travellers frequenting the city. Four Seasons at Worli as well as High-Street

Phoenix, a part of a large-scale development at Lower Parel, are two prominent developments underway in

Central Mumbai.

Ease in availability of land together with increasing number of companies preferring to set up their

operations in SBD and PBD locations will continue to drive extensive hotel development in these

micro-markets. Moreover, proposed infrastructure projects like Bandra-Worli sea link, Metro Rail and

Nhava-Seva sea link promise enhanced connectivity and hence shall augment hospitality growth in these

corridors. Commencement of the new international airport at Navi-Mumbai leading to increased air

capacity and better connectivity shall also push the demand for hotel accommodation in North Mumbai.

The upsurge in hospitality sector is attracting several developers holding large land banks to foray into the

market by means of management contract tie-ups with hospitality majors. By joining hands with local

developers, global hospitality majors like Accor, Hilton, Four Seasons, IHG, Marriott, and domestic players

like Taj, Park and Sarovar groups are planning a new entry or expansion in the city. In a recent move,

Mumbai based developer Nirmal Lifestyles Group has announced the plans to develop India's largest single

hospitality precinct with around 1,080 hotel rooms spread across five hotels, and a 3,000-seater convention

centre at the central suburb of Mulund.

Corollary to the economic boom in the country, foreign as well as domestic business and leisure travellers

are expected to grow manifold. This will continue to fuel the demand for hotels in Mumbai and favour

strong hospitality sector growth in the medium term.

Outlook

Pune

Overview

Pune is strategically located in the heart of one of the richest industrial belts in Maharashtra. Proximity to

India's financial capital, Mumbai, and the presence of numerous automotive companies had for long been

Pune's claim to fame in the industrial world. Availability of skilled personnel and infrastructure facilities have

also played a major role in attracting industries to Pune. With the promotion of Mumbai-Pune region as a

'knowledge corridor' by Maharashtra government, the IT/ITES sector has also seen a substantial growth in

this city.

With the entry of many Indian and global software players in Pune since 2000, the city has seen around

12-15% per annual increase in foreign and domestic corporate travellers. Hotels of all categories in the city

have witnessed a steady stream of visitors, which has led them to add more services to their list as well as

upgrade their existing ones.

Source: Knight Frank Research

Figure 15

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 16

100

60

40

20

0

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

80

Source: Knight Frank Research

Figure 14

20,000

15,000

10,000

5,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

Sta

r

Category-wise ARR

Rs.

Minimum Maximum

10 11

Seasons Service Apartments, Aundh

Current Scenario

Currently there are around 28-30 hotels and 4-5 service apartment projects operating in Pune in all

categories. The premium category hotels total to around 1,020 rooms and three-star category to around

375. Most of the hotels strategically located in the central parts of the city have easy access to the airport

and railway station as well as to the industrial units and IT locations of the city. While

Le Meridien and Sun 'n' Sand are located on Bund Garden Road, other five-star hotels like

Best Western Pride and Taj Blue Diamond are located on University Road and Koregaon Road respectively.

Four-star hotels like Central Park, Arora Towers and Sagar Plaza are located in central Pune as well whereas

Ambience Excellency is located in the northern suburbs of Pimpri-Chinchwad. Seasons, a newly launched

service apartment project is located at Aundh in the west while others like Bel-Air are located in eastern

Pune.

The five-star and five-star deluxe hotels comprising around 27% of the existing stock in the city cater to

around 85% of business travellers while the four-star category hotels dominate the market with 37% of the

current stock catering to around 80% of business travellers, the rest being leisure travellers. Presently,

foreign business visitors account for almost 60% of total visitors to the city. The manufacturing and

automobile units in Pimpri-Chinchwad as well Chakan and Ranjangaon Industrial areas contribute to an

average of 55% of the total room demand while the IT sector in the city contributes 45%. The airline transit

crew generates around 2-3% of room nights annually in few four-star hotels.

Hotel in the premium category in Pune observed a marginal decrease in the average occupancy from

approximately 84% in 2005 to 81% in 2006. The average occupancy is expected to remain constant at

around 83-85% for the next few years till the opening of new properties in Pune after which the occupancy

levels may fall by almost 3-5% and remain constant thereafter.

The average room rates for premium category hotels in the city have shown a constant increase by almost

55% annually in the past few years. The ARR achieved by premium hotels in Pune is around Rs.6,800. This

trend is likely to continue for a few years due to limited supply of additional hotel rooms in the market.

five-star deluxe hotels

like

Taj Blue Diamond, Koregaon Road

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

Due to the ever-rising demand from the corporate sector for quality banqueting facilities for corporate

functions, most of the hotels have at least 3-4 large and well-equipped banquet halls.

Out of the net revenue generated in all segments in hotels in Pune, rooms in the premium category

contribute almost 72% of the net revenue, the F&B segment contributes a substantial 27% of which

restaurants and the MICE segment contribute 7% and 20% respectively.

For close to a decade, no new hotel brands have entered Pune. However, since the last year close to 20 new

hotels across all categories are planning to set up properties in Pune. Around 55% of the upcoming

properties in Pune are five-star properties, the rest being four-star and budgets hotels The eastern suburb of

Pune along Nagar Road-Kharadi and Magarpatta will witness the launch of around 3-4 hotels in the

premium category by international hotel groups like the Hyatt, Marriott Hotels, Starwood Hotels and

national-level groups like Shalimar Hotels.

Other locations like Lohegaon and Yerwada would have a concentration of around 5-6 new hotels, all in the

five-star category, including the Leela and JW Marriott. Nagar Road itself would get more than 350 rooms

with hotels by Shalimar and Hyatt coming up here. Also groups like Royal Orchid Hotel, Orchid Hotel and

Sayaji Hotel plan to set up large-scale properties in various locations in Pune.

Central Pune will see the development of several five-star properties like the Marriott Convention Centre

and Radisson Hotel by Carlson Hospitality Group. Overall, the Pune market is expected to add 4,500-5,000

rooms across all categories by 2010-11.

Pune, with its growing IT/ITES sector, biotechnology parks, automobile and manufacturing units, along with

improved international air connectivity and readily available manpower is expected to have an inevitable

effect on all the real estate sectors including the hotel segment.

The potential for service apartments, due to the increase in number of expatriate professionals as well as

long-stay business travellers visiting Pune, has greatly increased. Most of the service apartment projects in

the city have occupancy levels as high as 80-85%. Some of the quality service apartment projects in Pune

include Golden Nest, Bel Air, Beverly Hills and Seasons. The success of Seasons located at Aundh has

prompted the Orchid Group to launch the second property on Nagar Road. Pune will also witness the

launch of two more service apartment projects managed by Oakwoods as well as a five-star service

apartment project by Hyatt. Though the concept of a spa resort is yet to pick up in Pune, Lavasa an

upcoming mega township has plans of setting a five-star spa resort by Accor Group. The upcoming heritage

hotel at Saswad by Orchid Group also plans to include spa facilities within the property.

With increased investments in all sectors in Pune and the number of hotels coming up in various pockets,

the profile of the city has changed significantly. Thus, with further increase in hotel activity, especially in the

premium-end segment by international and national groups, this sector in Pune is expected to witness an

increased interest for investment opportunities by various funds in the country.

Outlook

Goa

Overview

Goa, located on the western coastline, is a leading tourist destination of India. This state covers an area of

around 3,702 sq. kms. and is well connected with the nation by key transportation linkages. Besides

tourism, other sectors like shipping, mining as well as fishing have been key economic drivers for Goa.

Internationally renowned for its beaches, Goa handles around 12% of all foreign tourist arrivals to India and

has become one of the most popular holiday destinations for European travellers. Goa is divided into two

districts viz. North and South Goa, with headquarters at Panaji and Margao respectively. North Goa, owing

to its proximity to the state capital Panaji, has well developed infrastructure, corporate houses and is

frequented by tourists. The main lands of Panaji, Tiswadi and Bardez have witnessed extensive real estate

development in the past few years.

Goa has continuous stretches of land parcels along its 105 km. coastline, which are ideal for development of

hospitality projects. Moreover, the prevalent development control regulations fostered growth of only

hospitality sector developments along the coastline by not permitting any other real estate development

along the stretch. Taking the first mover advantage, major hospitality brands came up on prime stretches of

Miramar, Calangute, Baga and Candolim till Anjuna beach and the estuary of Mandovi River. Benefiting

from their location in North Goa the three properties of Taj in the region, viz. Aguada Fort, Aguada

Hermitage and Taj Village, besides other premium category of hotels like Cidade De Goa and Goa Marriott

enjoy equal share of business and leisure travellers. Goa has a current inventory of around 2,800 rooms in

the premium segment, which includes around 1,787 rooms in the five-star deluxe and 348 rooms in the

five-star category.

Source: Knight Frank Research

Figure 18

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

1,000

3,000

5,000

7,000

Source: Knight Frank Research

Figure 19

80

40

20

0

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

10

30

50

60

70

Source: Knight Frank Research

Figure 17

10,000

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

Minimum Maximum

12 13

Park Hyatt, Arossim Beach The Leela Kempinski Goa, Mabor Cavelossim

Current Scenario

The saturated North Goa market has pushed the later entrants to develop their premium star category

properties either further north from Arambol beach till the fringes of Sindhudurg district in Maharashtra or

along the virgin beaches of South Goa from Bogmalo till Palolem and Canacona. Resort properties of

Taj Exotica, Intercontinental The Grand, The Leela Goa, Park Hyatt, Ramada Caravela and Club Mahindra

are replete with a number of facilities ranging from water sports, casinos, salons, specialty restaurants and

even a mini golf course. Spa and ayurvedic centres are the latest additions to attract mid-market

international and up-market domestic clientele.

Hospitality industry in Goa, till the last decade, was predominantly dependent on charter operations during

October to April, which contributed 70% share of average revenue. However, at present, the contribution

of the charter market segment has reduced to 30% of average annual revenues. While the period of

October-April is considered the prime season, the period of May to mid October is considered off-season.

In the process of narrowing the gap between occupancy levels as well as ARR values between season and

off-season period, premium star category hotels are making a welcome shift from the matured charter

market segment and are promoting other emerging segments offering higher operating margins.

A shift in demand from budget to premium star category hotels, even by the domestic leisure travellers in

Goa, has increased. There is a growing trend of conducting corporate off-sites, team building exercises and

conferences in premium hotels in Goa.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

Due to the ever-rising demand from the corporate sector for quality banqueting facilities for corporate

functions, most of the hotels have at least 3-4 large and well-equipped banquet halls.

Out of the net revenue generated in all segments in hotels in Pune, rooms in the premium category

contribute almost 72% of the net revenue, the F&B segment contributes a substantial 27% of which

restaurants and the MICE segment contribute 7% and 20% respectively.

For close to a decade, no new hotel brands have entered Pune. However, since the last year close to 20 new

hotels across all categories are planning to set up properties in Pune. Around 55% of the upcoming

properties in Pune are five-star properties, the rest being four-star and budgets hotels The eastern suburb of

Pune along Nagar Road-Kharadi and Magarpatta will witness the launch of around 3-4 hotels in the

premium category by international hotel groups like the Hyatt, Marriott Hotels, Starwood Hotels and

national-level groups like Shalimar Hotels.

Other locations like Lohegaon and Yerwada would have a concentration of around 5-6 new hotels, all in the

five-star category, including the Leela and JW Marriott. Nagar Road itself would get more than 350 rooms

with hotels by Shalimar and Hyatt coming up here. Also groups like Royal Orchid Hotel, Orchid Hotel and

Sayaji Hotel plan to set up large-scale properties in various locations in Pune.

Central Pune will see the development of several five-star properties like the Marriott Convention Centre

and Radisson Hotel by Carlson Hospitality Group. Overall, the Pune market is expected to add 4,500-5,000

rooms across all categories by 2010-11.

Pune, with its growing IT/ITES sector, biotechnology parks, automobile and manufacturing units, along with

improved international air connectivity and readily available manpower is expected to have an inevitable

effect on all the real estate sectors including the hotel segment.

The potential for service apartments, due to the increase in number of expatriate professionals as well as

long-stay business travellers visiting Pune, has greatly increased. Most of the service apartment projects in

the city have occupancy levels as high as 80-85%. Some of the quality service apartment projects in Pune

include Golden Nest, Bel Air, Beverly Hills and Seasons. The success of Seasons located at Aundh has

prompted the Orchid Group to launch the second property on Nagar Road. Pune will also witness the

launch of two more service apartment projects managed by Oakwoods as well as a five-star service

apartment project by Hyatt. Though the concept of a spa resort is yet to pick up in Pune, Lavasa an

upcoming mega township has plans of setting a five-star spa resort by Accor Group. The upcoming heritage

hotel at Saswad by Orchid Group also plans to include spa facilities within the property.

With increased investments in all sectors in Pune and the number of hotels coming up in various pockets,

the profile of the city has changed significantly. Thus, with further increase in hotel activity, especially in the

premium-end segment by international and national groups, this sector in Pune is expected to witness an

increased interest for investment opportunities by various funds in the country.

Outlook

Goa

Overview

Goa, located on the western coastline, is a leading tourist destination of India. This state covers an area of

around 3,702 sq. kms. and is well connected with the nation by key transportation linkages. Besides

tourism, other sectors like shipping, mining as well as fishing have been key economic drivers for Goa.

Internationally renowned for its beaches, Goa handles around 12% of all foreign tourist arrivals to India and

has become one of the most popular holiday destinations for European travellers. Goa is divided into two

districts viz. North and South Goa, with headquarters at Panaji and Margao respectively. North Goa, owing

to its proximity to the state capital Panaji, has well developed infrastructure, corporate houses and is

frequented by tourists. The main lands of Panaji, Tiswadi and Bardez have witnessed extensive real estate

development in the past few years.

Goa has continuous stretches of land parcels along its 105 km. coastline, which are ideal for development of

hospitality projects. Moreover, the prevalent development control regulations fostered growth of only

hospitality sector developments along the coastline by not permitting any other real estate development

along the stretch. Taking the first mover advantage, major hospitality brands came up on prime stretches of

Miramar, Calangute, Baga and Candolim till Anjuna beach and the estuary of Mandovi River. Benefiting

from their location in North Goa the three properties of Taj in the region, viz. Aguada Fort, Aguada

Hermitage and Taj Village, besides other premium category of hotels like Cidade De Goa and Goa Marriott

enjoy equal share of business and leisure travellers. Goa has a current inventory of around 2,800 rooms in

the premium segment, which includes around 1,787 rooms in the five-star deluxe and 348 rooms in the

five-star category.

Source: Knight Frank Research

Figure 18

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

1,000

3,000

5,000

7,000

Source: Knight Frank Research

Figure 19

80

40

20

0

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

10

30

50

60

70

Source: Knight Frank Research

Figure 17

10,000

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

Minimum Maximum

12 13

Park Hyatt, Arossim Beach The Leela Kempinski Goa, Mabor Cavelossim

Current Scenario

The saturated North Goa market has pushed the later entrants to develop their premium star category

properties either further north from Arambol beach till the fringes of Sindhudurg district in Maharashtra or

along the virgin beaches of South Goa from Bogmalo till Palolem and Canacona. Resort properties of

Taj Exotica, Intercontinental The Grand, The Leela Goa, Park Hyatt, Ramada Caravela and Club Mahindra

are replete with a number of facilities ranging from water sports, casinos, salons, specialty restaurants and

even a mini golf course. Spa and ayurvedic centres are the latest additions to attract mid-market

international and up-market domestic clientele.

Hospitality industry in Goa, till the last decade, was predominantly dependent on charter operations during

October to April, which contributed 70% share of average revenue. However, at present, the contribution

of the charter market segment has reduced to 30% of average annual revenues. While the period of

October-April is considered the prime season, the period of May to mid October is considered off-season.

In the process of narrowing the gap between occupancy levels as well as ARR values between season and

off-season period, premium star category hotels are making a welcome shift from the matured charter

market segment and are promoting other emerging segments offering higher operating margins.

A shift in demand from budget to premium star category hotels, even by the domestic leisure travellers in

Goa, has increased. There is a growing trend of conducting corporate off-sites, team building exercises and

conferences in premium hotels in Goa.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

This has, in turn, increased the contribution of the MICE segment to the hospitality market revenues of Goa.

As per hotel industry sources, average occupancy in premium star category hotels is around 65%. While

occupancy levels in the months from mid October-January touches almost 78%, during the festive season

(December-January), occupancy levels fall just marginally short of 100%.

In 2006,Goa witnessed a dip in the charter market with a slight reduction in the occupancy levels, and this

was countered by increase in ARRs in order to augment the revenue generation. Foreign individual

travellers, group travellers, holiday packages and MICE segment accounted for medium occupancy

(55-60%) levels and ARRs in the range of Rs.5,000-7,000 during the second season of 2006, thus shrinking

the long-established off-season period. The occupancy levels in prime season of 2006 were 84% with ARRs

ranging from Rs.8,000-12,000. Thus the year 2006, witnessed an ARR of Rs.6,700. Inspite of the discount in

the ARRs offered to the charter market, this segment still has higher revenue contribution from F&B

(15-20 %) and miscellaneous segments .

Besides earmarking a budget of Rs. 200 million for marketing Goa globally, the state government of Goa

has been undertaking numerous initiatives to promote Goa as an emerging corporate destination. With the

development of Rajiv Gandhi IT Habitat, a 46-acre IT Park by the state government and five approved SEZ

projects the corporate scenario in Goa is expected to undergo a major facelift. This shall result in increased

demand for budget hotels and service apartments within Panaji, Dona Paula and various industrial belts.

The demand coming from the charter segment will be the major revenue earner for both the categories.

NRI and industrialist weddings are the latest addition to MICE segment with a revenue contribution of

7-10%. Besides the beaches, Goa also has world heritage architecture and rich flora-fauna to offer to

tourism supplementing untapped potential of heritage tourism, eco-tourism and medical tourism.

The ever increasing potential of the hospitality sector has been attracting investments from many of the

disparate industrial houses from Goa, shipping magnate Salgaonkar's being one of those who have

expanded their portfolio into the hospitality market by joining hands with Marriott. A number of hoteliers

are making entry into the Goa market by forming consortiums and joint ventures with real estate

developers and existing hoteliers. As per industry sources, the budget category of hotels will have supply of

about 250 new rooms in the forthcoming years. As opposed to this, around 980 rooms are being planned

in the premium category by 2010.

(5-10%)

Outlook

Bangalore

Overview

Bangalore, located on the southern Deccan Mysore plateau, is the principal administrative, commercial and

industrial centre of the state of Karnataka. Population-wise it is the fifth largest city of India and is hailed as

Asia's fastest growing cosmopolitan.

Bangalore is the nerve centre of the IT industry in India and is the world's fourth largest technology hub. It

is home to some of the largest national as well as international IT/ITES, R&D and technology companies of

the world. Bangalore has a fairly diverse portfolio of activities with firms manufacturing machine tools,

electronic products and auto-components, besides the IT sector. With more than 240 biotech firms having a

base in Bangalore, it is also a favoured biotechnology destination. All these varied business 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% of actual room

requirements are being catered to leaving a substantial demand-supply mismatch.

Source: Knight Frank Research

Figure 21

15,000

10,000

5,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 22

82

78

76

74

72

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

80

Source: Knight Frank Research

Figure 20

10,000

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Heri

tag

e

Category-wise ARR

Rs.

Minimum Maximum

12,000

14,000

16,000

14 15

The Leela Palace, Airport Road The Oberoi, Mahatma Gandhi Road

Current Scenario

Bangalore accounts for 51% of foreign business travellers visiting India annually. International corporate

travellers occupy almost 90% of the hotel rooms in Bangalore. Over the last couple of years, the city's

booming IT/ITES sector have been responsible for nearly 45-50% 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 travellers 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 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

travellers. 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 corporates locating in the new business locations of

the city.

Hospitality sector demand in Bangalore continues 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.

The ARR in premium category hotels in Bangalore has recorded a growth of 18.5% 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%, have been observed to have

declined marginally in the recent years.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

This has, in turn, increased the contribution of the MICE segment to the hospitality market revenues of Goa.

As per hotel industry sources, average occupancy in premium star category hotels is around 65%. While

occupancy levels in the months from mid October-January touches almost 78%, during the festive season

(December-January), occupancy levels fall just marginally short of 100%.

In 2006,Goa witnessed a dip in the charter market with a slight reduction in the occupancy levels, and this

was countered by increase in ARRs in order to augment the revenue generation. Foreign individual

travellers, group travellers, holiday packages and MICE segment accounted for medium occupancy

(55-60%) levels and ARRs in the range of Rs.5,000-7,000 during the second season of 2006, thus shrinking

the long-established off-season period. The occupancy levels in prime season of 2006 were 84% with ARRs

ranging from Rs.8,000-12,000. Thus the year 2006, witnessed an ARR of Rs.6,700. Inspite of the discount in

the ARRs offered to the charter market, this segment still has higher revenue contribution from F&B

(15-20 %) and miscellaneous segments .

Besides earmarking a budget of Rs. 200 million for marketing Goa globally, the state government of Goa

has been undertaking numerous initiatives to promote Goa as an emerging corporate destination. With the

development of Rajiv Gandhi IT Habitat, a 46-acre IT Park by the state government and five approved SEZ

projects the corporate scenario in Goa is expected to undergo a major facelift. This shall result in increased

demand for budget hotels and service apartments within Panaji, Dona Paula and various industrial belts.

The demand coming from the charter segment will be the major revenue earner for both the categories.

NRI and industrialist weddings are the latest addition to MICE segment with a revenue contribution of

7-10%. Besides the beaches, Goa also has world heritage architecture and rich flora-fauna to offer to

tourism supplementing untapped potential of heritage tourism, eco-tourism and medical tourism.

The ever increasing potential of the hospitality sector has been attracting investments from many of the

disparate industrial houses from Goa, shipping magnate Salgaonkar's being one of those who have

expanded their portfolio into the hospitality market by joining hands with Marriott. A number of hoteliers

are making entry into the Goa market by forming consortiums and joint ventures with real estate

developers and existing hoteliers. As per industry sources, the budget category of hotels will have supply of

about 250 new rooms in the forthcoming years. As opposed to this, around 980 rooms are being planned

in the premium category by 2010.

(5-10%)

Outlook

Bangalore

Overview

Bangalore, located on the southern Deccan Mysore plateau, is the principal administrative, commercial and

industrial centre of the state of Karnataka. Population-wise it is the fifth largest city of India and is hailed as

Asia's fastest growing cosmopolitan.

Bangalore is the nerve centre of the IT industry in India and is the world's fourth largest technology hub. It

is home to some of the largest national as well as international IT/ITES, R&D and technology companies of

the world. Bangalore has a fairly diverse portfolio of activities with firms manufacturing machine tools,

electronic products and auto-components, besides the IT sector. With more than 240 biotech firms having a

base in Bangalore, it is also a favoured biotechnology destination. All these varied business 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% of actual room

requirements are being catered to leaving a substantial demand-supply mismatch.

Source: Knight Frank Research

Figure 21

15,000

10,000

5,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 22

82

78

76

74

72

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

80

Source: Knight Frank Research

Figure 20

10,000

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Heri

tag

e

Category-wise ARR

Rs.

Minimum Maximum

12,000

14,000

16,000

14 15

The Leela Palace, Airport Road The Oberoi, Mahatma Gandhi Road

Current Scenario

Bangalore accounts for 51% of foreign business travellers visiting India annually. International corporate

travellers occupy almost 90% of the hotel rooms in Bangalore. Over the last couple of years, the city's

booming IT/ITES sector have been responsible for nearly 45-50% 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 travellers 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 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

travellers. 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 corporates locating in the new business locations of

the city.

Hospitality sector demand in Bangalore continues 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.

The ARR in premium category hotels in Bangalore has recorded a growth of 18.5% 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%, have been observed to have

declined marginally in the recent years.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

As the business travellers are the highest contributors to room demand, approximately all business hotels

provide exclusive amenities like Wi-fi, secretarial services, golf on request, etc. Out of the net revenue

generated in hotels, rooms in the premium category contribute almost 66% of the net revenue while the

F&B segment contributes a substantial 20%. Since Bangalore is not a leisure destination, the contribution of

the MICE segment is not very significant. This segment contributes around 10% of the total revenue.

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

travellers to the city will increase with the commencement of the new airport. Knight Frank Research

estimates that around 3,075 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.

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 in the city. Plans are underway to offer government owned land at 50% 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, the infrastructure

has still a long way to go. The increase in the number of long-stay business travellers and limited number of

hotels has lured business travellers 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 periods of extended stay.

The occupancy level in service apartments ranges between 80-90%. 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 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 the future hotel developments, thus enabling a continuation in the present trend of value

appreciation.

Outlook

Hyderabad

Overview

Hyderabad, the erstwhile 'City of Nizams' is the capital of the southern state of Andhra Pradesh. Famed for

its princely monuments, Hyderabad has been one of the prime tourist centres of the country. In the recent

years, this city of historical significance has emerged as a favoured IT/ITES destination of India.

Good quality of life, low cost of living, rapid pace of infrastructure development and aggressive promotion

by the government has attracted the interest of national and international corporate entities to the city. The

post independence 'twin cities' image of Hyderabad-Secunderabad is being fast replaced with that of a

21st century modern, tech savvy image of Cyberabad.

Riding on the steady growth of the new economy sectors, the hospitality industry in the city is thriving with

healthy occupancy levels and consistent rise in demand. Prominent star category hospitality developments

in Hyderabad are concentrated around the Hussain Sagar Lake. The CBD location of Begumpet houses

five-star hotels like Ramada Manohar and ITC Kakatiya Sheraton while off-CBD location of Banjara Hills

houses three properties of the Taj Group. The 300-room Novotel Hotel managed by the Accor Group,

located at Hitec City, is the latest entrant to the premium hotel segment.

Source: Knight Frank Research

Figure 24

10,000

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 25

85

80

75

70

2003

2004

2005

Year

Occupancy RatePerc

en

t

2006

90

Source: Knight Frank Research

Figure 23

10,000

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

12,000

Minimum Maximum

16 17

Hyderabad Marriott, Tank Bund Road

Current Scenario

The hospitality industry in Hyderabad is upbeat with demand for hotels touching an all time high.

Currently, more than 85% of the clientele in five-star hotels in the city are from the corporate sector out of

which about 60% are foreign business travellers. Apart from this, there has also been a phenomenal

increase in domestic and international tourists to the city.

At present the city has 7 hotels in the five-star deluxe, five-star and heritage hotel category with a total

inventory of 1,646 rooms. Besides these, 3 four-star hotels totaling to around 290 rooms are also

operational in the city. The surge in demand has encouraged a number of star category hotels to carry out

expansion plans totaling to around 524 rooms. Taj Deccan located off Road No.1, Banjara Hills, is expected

to add around 200 rooms by 2008. Another five-star hotel, Hyderabad Marriott (formerly Viceroy), located

at Tank Bund Road, is undergoing expansion of its property. Post expansion the hotel shall have 308 rooms

by 2008.

Besides the above, over 7 five-star and five-star deluxe hotels are being developed across the city and will

result in supply of approximately 1,880 rooms. As most of the new supply is coming up in the premium

segment, the demand for rooms in the four-star category is still largely unmet. Of the new supply,

upcoming 4-star hotels will contribute around 570 rooms in the next 3-4 years.

Quite significantly, hotels in Hyderabad have recorded a 41% growth in ARRs, from Rs.4,649 in 2004 to

Rs.6,562 in 2005. Currently, the city has an ARR of around Rs.8,450. This can be attributed to the fact that

limited supply against demand came into the city in the premium segment during the period 2000-05.

Before the IT boom, the occupancies in the star hotels used to be in the range of 50-60% which has now

risen to an average of 80-83%.

Taj Krishna, Banjara Hills

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

As the business travellers are the highest contributors to room demand, approximately all business hotels

provide exclusive amenities like Wi-fi, secretarial services, golf on request, etc. Out of the net revenue

generated in hotels, rooms in the premium category contribute almost 66% of the net revenue while the

F&B segment contributes a substantial 20%. Since Bangalore is not a leisure destination, the contribution of

the MICE segment is not very significant. This segment contributes around 10% of the total revenue.

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

travellers to the city will increase with the commencement of the new airport. Knight Frank Research

estimates that around 3,075 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.

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 in the city. Plans are underway to offer government owned land at 50% 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, the infrastructure

has still a long way to go. The increase in the number of long-stay business travellers and limited number of

hotels has lured business travellers 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 periods of extended stay.

The occupancy level in service apartments ranges between 80-90%. 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 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 the future hotel developments, thus enabling a continuation in the present trend of value

appreciation.

Outlook

Hyderabad

Overview

Hyderabad, the erstwhile 'City of Nizams' is the capital of the southern state of Andhra Pradesh. Famed for

its princely monuments, Hyderabad has been one of the prime tourist centres of the country. In the recent

years, this city of historical significance has emerged as a favoured IT/ITES destination of India.

Good quality of life, low cost of living, rapid pace of infrastructure development and aggressive promotion

by the government has attracted the interest of national and international corporate entities to the city. The

post independence 'twin cities' image of Hyderabad-Secunderabad is being fast replaced with that of a

21st century modern, tech savvy image of Cyberabad.

Riding on the steady growth of the new economy sectors, the hospitality industry in the city is thriving with

healthy occupancy levels and consistent rise in demand. Prominent star category hospitality developments

in Hyderabad are concentrated around the Hussain Sagar Lake. The CBD location of Begumpet houses

five-star hotels like Ramada Manohar and ITC Kakatiya Sheraton while off-CBD location of Banjara Hills

houses three properties of the Taj Group. The 300-room Novotel Hotel managed by the Accor Group,

located at Hitec City, is the latest entrant to the premium hotel segment.

Source: Knight Frank Research

Figure 24

10,000

8,000

6,000

4,000

2,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

Source: Knight Frank Research

Figure 25

85

80

75

70

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

90

Source: Knight Frank Research

Figure 23

10,000

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

12,000

Minimum Maximum

16 17

Hyderabad Marriott, Tank Bund Road

Current Scenario

The hospitality industry in Hyderabad is upbeat with demand for hotels touching an all time high.

Currently, more than 85% of the clientele in five-star hotels in the city are from the corporate sector out of

which about 60% are foreign business travellers. Apart from this, there has also been a phenomenal

increase in domestic and international tourists to the city.

At present the city has 7 hotels in the five-star deluxe, five-star and heritage hotel category with a total

inventory of 1,646 rooms. Besides these, 3 four-star hotels totaling to around 290 rooms are also

operational in the city. The surge in demand has encouraged a number of star category hotels to carry out

expansion plans totaling to around 524 rooms. Taj Deccan located off Road No.1, Banjara Hills, is expected

to add around 200 rooms by 2008. Another five-star hotel, Hyderabad Marriott (formerly Viceroy), located

at Tank Bund Road, is undergoing expansion of its property. Post expansion the hotel shall have 308 rooms

by 2008.

Besides the above, over 7 five-star and five-star deluxe hotels are being developed across the city and will

result in supply of approximately 1,880 rooms. As most of the new supply is coming up in the premium

segment, the demand for rooms in the four-star category is still largely unmet. Of the new supply,

upcoming 4-star hotels will contribute around 570 rooms in the next 3-4 years.

Quite significantly, hotels in Hyderabad have recorded a 41% growth in ARRs, from Rs.4,649 in 2004 to

Rs.6,562 in 2005. Currently, the city has an ARR of around Rs.8,450. This can be attributed to the fact that

limited supply against demand came into the city in the premium segment during the period 2000-05.

Before the IT boom, the occupancies in the star hotels used to be in the range of 50-60% which has now

risen to an average of 80-83%.

Taj Krishna, Banjara Hills

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

According to industry sources, it is not unusual to find the occupancy rate going up more than 90% in

weekdays during October to March. Over the next two years, occupancy rates are expected to remain

constant in the premium category hotels.

The new hotels coming up in the city include the Taj Falaknuma Palace at Falaknama Junction, Ista at

Gachibowli and Le Meridien at Ameerpeth. The Hyatt, being developed along Banjara Hills Road No.2 on a

3-acre land parcel, will have around 300 rooms by end-2007. Besides, Hilton will also come up with a

300-room hotel in the city. Meanwhile, Mumbai-based developers K Raheja Corp have included a premium

250-room hotel in their IT Park Mindspace at Hitec City, which will be operational in 2008.

Hyderabad is fast becoming a favoured MICE destination with a number of important events being

organised in the city. The prestigious convention of the Asian Development Bank was one of the events that

took place in the city in 2006. The industry is upbeat with several national and international events lined up

for this year as well. This is foreseen to translate into increased demand for the hospitality sector.

Hyderabad's increasing popularity as a destination for IT/ITES companies and a favoured venue for

important sports events, conventions and exhibitions, amongst others, portend well for the continued

growth in the hospitality industry. The industry expects further boost to the industry with the upcoming

international airport at Shamshabad, scheduled to be operational by 2009-10.

Besides the IT/ITES sector, promising trend in the sunrise sectors like biotechnology, pharmaceuticals and

growth in the medical tourism would also be essential demand drivers for hotel rooms. Moreover,

important developments like the Hyderabad International Convention Centre, the Genome Valley,

Hitec City, Financial District and ICICI Knowledge Park will continue to drive the demand in the hospitality

sector.

With the number of hotel rooms under development, supply in the premium hotel segment is expected to

grow at the rate of around 25% in the next five years in contrast to a complete lack of supply in the last five

years. However, there have been some reservations in industry quarters regarding the demand-supply

scenario. Many of the corporates present in the city are in the process of building their own guest-houses to

cater to their company's requirements, which can result in a possible over-supply situation.

Outlook

Source: Knight Frank Research

Figure 26

15,000

10,000

5,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

Minimum Maximum

18 19

Chennai

Overview

Chennai is the capital of the state of Tamil Nadu and India's fourth largest metropolitan city. Known for its

cultural heritage and temple architecture, Chennai is also one of the important commercial and industrial

destinations of India. The city is the base of about 40% of India's automobile industry and has also become

a major centre for high-end IT services and ITES outsourcing.

Chennai's diversified economic base, driven primarily by automobile, software services, hardware

manufacturing and financial services as well as other industries including petrochemicals, textiles and

apparel industries has resulted in the inflow of large number of business travellers to the city. Besides this,

being a port-city, trading also contributes greatly to its economy and makes it a transit point for sea-bound

travellers. The city is well connected internationally as well as to other parts of the country by all modes of

transport.

The current growth of the IT/ITES industry has triggered a growth phase in residential, commercial as well

as the hospitality industry. Business travellers have grown manifold since the last few years. To support the

accomodation demand, many business hotels as well as budget hotels have sprung up in the city along

with few five-star luxury hotels. Majority of the business of the existing hotels can be attributed to the

burgeoning IT/ITES sector in the city.

Source: Knight Frank Research

Figure 27

5,000

4,000

3,000

2,000

1,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

6,000

Source: Knight Frank Research

Figure 28

100

60

40

20

0

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

80

Fishermans Cove, East Coast Road Le Royal Meridien, GST Road

Current Scenario

Chennai has a host of reputed hotel chains in the five, five-star deluxe hotels and four-star categories. It has

around 22-23 hotels in the premium category with an inventory of around 3,570 rooms including

25 rooms in the heritage category. The city being a commercial destination, around 88% of the hotel

clientele are business travellers out of which the airline crew contributes around 10%. Leisure travellers

contribute a negligible 10% of the hotel room demand in the city. Currently Chennai hotel market is

concentrated around the CBD at Anna Salai, Cathedral Road as well as other locations like T Nagar and

GST Road. These include ITC Hotel Park Sheraton and Towers at TTK Road, The Park and Courtyard Marriott

at Anna Salai, Chola Sheraton at Cathedral Road, Trident Hilton Chennai at GST Road and GRT Grand at

T Nagar. Luxury hotels like Fisherman's Cove located on the East Coast Road mainly attract international

tourists and the upper-end domestic leisure travellers.

Chennai market has witnessed a gradual increase in occupancies 2002 onwards. The average occupancy of

premium grade hotels grew from 61% in 2003 to 76% in 2005. In 2006,the average occupancy of Chennai

reached 79% and this is expected to increase further at a steady rate over the medium term, till more new

hotels are launched and become operational in the city. In the last few years, with rise in demand,

Chennai's ARR has gone up by more than 15%. With recorded ARR of Rs.4,675 in 2005 and Rs.5,450 in

2006, the growth is expected to escalate further in the next few years.

Chennai attracts negligible leisure traffic, so this segment does not contribute significantly to the hotel

room demand. Also, as around 60% of the business travellers visiting Chennai are foreign corporate

travellers, facilities and amenities in the hotels are provided to match the high tariff costs. Room revenues

contribute around 60% of the net generated revenue while the MICE segment contributes around 30%.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

According to industry sources, it is not unusual to find the occupancy rate going up more than 90% in

weekdays during October to March. Over the next two years, occupancy rates are expected to remain

constant in the premium category hotels.

The new hotels coming up in the city include the Taj Falaknuma Palace at Falaknama Junction, Ista at

Gachibowli and Le Meridien at Ameerpeth. The Hyatt, being developed along Banjara Hills Road No.2 on a

3-acre land parcel, will have around 300 rooms by end-2007. Besides, Hilton will also come up with a

300-room hotel in the city. Meanwhile, Mumbai-based developers K Raheja Corp have included a premium

250-room hotel in their IT Park Mindspace at Hitec City, which will be operational in 2008.

Hyderabad is fast becoming a favoured MICE destination with a number of important events being

organised in the city. The prestigious convention of the Asian Development Bank was one of the events that

took place in the city in 2006. The industry is upbeat with several national and international events lined up

for this year as well. This is foreseen to translate into increased demand for the hospitality sector.

Hyderabad's increasing popularity as a destination for IT/ITES companies and a favoured venue for

important sports events, conventions and exhibitions, amongst others, portend well for the continued

growth in the hospitality industry. The industry expects further boost to the industry with the upcoming

international airport at Shamshabad, scheduled to be operational by 2009-10.

Besides the IT/ITES sector, promising trend in the sunrise sectors like biotechnology, pharmaceuticals and

growth in the medical tourism would also be essential demand drivers for hotel rooms. Moreover,

important developments like the Hyderabad International Convention Centre, the Genome Valley,

Hitec City, Financial District and ICICI Knowledge Park will continue to drive the demand in the hospitality

sector.

With the number of hotel rooms under development, supply in the premium hotel segment is expected to

grow at the rate of around 25% in the next five years in contrast to a complete lack of supply in the last five

years. However, there have been some reservations in industry quarters regarding the demand-supply

scenario. Many of the corporates present in the city are in the process of building their own guest-houses to

cater to their company's requirements, which can result in a possible over-supply situation.

Outlook

Source: Knight Frank Research

Figure 26

15,000

10,000

5,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

Minimum Maximum

18 19

Chennai

Overview

Chennai is the capital of the state of Tamil Nadu and India's fourth largest metropolitan city. Known for its

cultural heritage and temple architecture, Chennai is also one of the important commercial and industrial

destinations of India. The city is the base of about 40% of India's automobile industry and has also become

a major centre for high-end IT services and ITES outsourcing.

Chennai's diversified economic base, driven primarily by automobile, software services, hardware

manufacturing and financial services as well as other industries including petrochemicals, textiles and

apparel industries has resulted in the inflow of large number of business travellers to the city. Besides this,

being a port-city, trading also contributes greatly to its economy and makes it a transit point for sea-bound

travellers. The city is well connected internationally as well as to other parts of the country by all modes of

transport.

The current growth of the IT/ITES industry has triggered a growth phase in residential, commercial as well

as the hospitality industry. Business travellers have grown manifold since the last few years. To support the

accomodation demand, many business hotels as well as budget hotels have sprung up in the city along

with few five-star luxury hotels. Majority of the business of the existing hotels can be attributed to the

burgeoning IT/ITES sector in the city.

Source: Knight Frank Research

Figure 27

5,000

4,000

3,000

2,000

1,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

6,000

Source: Knight Frank Research

Figure 28

100

60

40

20

0

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

80

Fishermans Cove, East Coast Road Le Royal Meridien, GST Road

Current Scenario

Chennai has a host of reputed hotel chains in the five, five-star deluxe hotels and four-star categories. It has

around 22-23 hotels in the premium category with an inventory of around 3,570 rooms including

25 rooms in the heritage category. The city being a commercial destination, around 88% of the hotel

clientele are business travellers out of which the airline crew contributes around 10%. Leisure travellers

contribute a negligible 10% of the hotel room demand in the city. Currently Chennai hotel market is

concentrated around the CBD at Anna Salai, Cathedral Road as well as other locations like T Nagar and

GST Road. These include ITC Hotel Park Sheraton and Towers at TTK Road, The Park and Courtyard Marriott

at Anna Salai, Chola Sheraton at Cathedral Road, Trident Hilton Chennai at GST Road and GRT Grand at

T Nagar. Luxury hotels like Fisherman's Cove located on the East Coast Road mainly attract international

tourists and the upper-end domestic leisure travellers.

Chennai market has witnessed a gradual increase in occupancies 2002 onwards. The average occupancy of

premium grade hotels grew from 61% in 2003 to 76% in 2005. In 2006,the average occupancy of Chennai

reached 79% and this is expected to increase further at a steady rate over the medium term, till more new

hotels are launched and become operational in the city. In the last few years, with rise in demand,

Chennai's ARR has gone up by more than 15%. With recorded ARR of Rs.4,675 in 2005 and Rs.5,450 in

2006, the growth is expected to escalate further in the next few years.

Chennai attracts negligible leisure traffic, so this segment does not contribute significantly to the hotel

room demand. Also, as around 60% of the business travellers visiting Chennai are foreign corporate

travellers, facilities and amenities in the hotels are provided to match the high tariff costs. Room revenues

contribute around 60% of the net generated revenue while the MICE segment contributes around 30%.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200720 21

According to market estimates, ITC Park Sheraton has the highest room revenues amongst all hotels in

Chennai and captures almost 20% of the market.

Within the next few years, around 10-12 new hotels and service apartment projects with approximately

2,900 rooms in the premium category will be launched in Chennai. Few established groups like ITC and

the Taj Group are planning to add more new properties in the city. Other groups like Bharat Hotels,

Sarovar's Hometel Hotels as well as Leela Hotels have plans of establishing their name in the hospitality

market in Chennai.

Chennai hotel market is expected to see a steady growth in the medium to long term driven by an

expansion of the IT/ITES, biotech, automotive and the telecom sector. Old Mahabalipuram Road, being

developed as an IT corridor, as well as old industrial unit areas such as Guindy, Taramani, Ambattur and

Padi, are being converted into software technology parks. Presently, these locations do not have any major

hotel development. However a large catchment of IT/ITES companies and their captive boarding, lodging

and conference requirements will make these locations a viable business hotel market.

Large-scale IT developments along the Old Mahabalipuram Road as well as the development of the

Mahindra World City beyond the airport are changing the face of the real estate market in Chennai.

Also, with the infrastructure initiatives being undertaken by various local development bodies in Chennai,

the city is witnessing increased levels of interest as an attractive business destination in southern India.

Moreover, as the real estate market in the city is opening up and becoming more organised, participation of

national and international developers/funds in the development of IT parks, commercial buildings and

hospitality projects are likely to increase.

Thus, with the emergence of new business districts, the demand for hotel rooms to cater to the business

travellers will also increase. Besides, Chennai has a distinct advantage of having a long coastline, which can

be explored to develop leisure hotels, which will also serve to attract more leisure tourists in the city.

With the growing need for longer-stay options, the service apartment segment is another sector, which can

be explored in this segment. Though some service apartments exist in Chennai, there is an increased need

to develop these to their full potential on account of increasing demand from the IT/ITES segment together

with the manufacturing and processing industry. Some of the groups planning to enter this market segment

include Singapore-based service apartment major Ascott Group, which plans to develop a 200-room

project, and a few service apartment projects by Oakwood Group.

Outlook

Source: Knight Frank Research

Figure 29

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Heri

tag

e

Category-wise ARR

Rs.

Minimum Maximum

10,000

Kochi

Overview

Kochi is the commercial capital of the southern state of Kerala and has been an important port of India

since historic times. Being a coastal city, the economy of Kochi is driven by fisheries, shipping and allied

industries besides gold merchandising and export of spices. With the recent efforts by the Government of

Kerala to promote Kochi as an alternate IT/ITES destination, the investments in this sector are expected to

rise giving further boost to the city's as well as the state's economy.

The city acts as the gateway to Kerala by being well connected with the nation through all transportation

linkages. Kochi is a leisure destination and also acts as a transit point for the leisure travellers' onward to

backwater spots or hill stations. Over the years, Kochi has witnessed a change of clientele from leisure to

business travellers, with business travellers now constituting at least 50% of the total travellers to the city.

MG Road and Marine Drive, the key commercial locations of the city, have been the primary hub for

business hotels. Some of the major hotels in these locations are Taj Residency, Avenue Regent and

Gokulam Park Inn. Fort Kochi and Bolgatty, being major tourism spots have been favoured locations of

leisure hotels housing Malabar House and Bolgatty Palace, amongst other prominent hotels. Scarcity of vast

expanse of continuous land in these existing hospitality pockets, easy accessibility from the newly set-up

international airport at Nedumbassery, proximity to the emerging IT/ITES pockets of Kakkanad and

Kalamssery, have led new entrants to plan and launch premium star category hospitality projects at Maradu

and Kumbalam along NH-47 and its bye-pass.

Source: Knight Frank Research

Figure 30

5,000

4,000

3,000

2,000

1,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

6,000

Source: Knight Frank Research

Figure 31

68

66

64

62

2003

2004

2005

Year

Occupancy RatePerc

en

t

2006

70

Taj Malabar, Willingdon Island Le Meridien, Maradu

Current Scenario

As per industry estimates, Kochi had a 50-55% share of the total 7 million tourists coming to Kerala last

year. With the rapid expansion of the IT/ITES sector in the city, this share is likely to grow rapidly in the near

future. Currently, the hotel room demand generators are transit travellers and business travellers from the

shipping sector, marine and agro-export industries based in the city. BFSI and the telecom sectors have also

been significant contributors to demand in the past two years.

With an inventory size of about 988 rooms, Kochi experiences an acute shortage of rooms in peak season

(mid October-December). In 2006, the ARR achieved by five-star deluxe and five-star hotels was in the

range of Rs.3,575-5,700 while the ARR achieved by the heritage hotel was Rs.7,000. The four-star category

hotels achieved ARR in the range of Rs.2,800-3,000. Average occupancy level witnessed throughout the

year was 67%, with season (mid October-March) occupancy levels touching 70% leaving behind a

marginal gap of 5-7% less in slack season (April-mid October). The high occupancy levels in the city hotels

have been a result of major upsurge in the inflow of business travellers. This trend has continued even

during slack tourist season and created acute shortage of rooms during peak season.

Business travellers form approximately 80% of the clientele of hotels like Taj Residency on Marine Drive and

Gokulam Park Inn on MG Road. On the contrary, the heritage hotels in Fort Kochi like Malabar and

Brounton Boatyard have a significant share of leisure travellers as their clientele. Located close to the naval

base and shipyard, business hotels like Casino and Trident Hilton serve the corporate travelers in Willingdon

Island.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200720 21

According to market estimates, ITC Park Sheraton has the highest room revenues amongst all hotels in

Chennai and captures almost 20% of the market.

Within the next few years, around 10-12 new hotels and service apartment projects with approximately

2,900 rooms in the premium category will be launched in Chennai. Few established groups like ITC and

the Taj Group are planning to add more new properties in the city. Other groups like Bharat Hotels,

Sarovar's Hometel Hotels as well as Leela Hotels have plans of establishing their name in the hospitality

market in Chennai.

Chennai hotel market is expected to see a steady growth in the medium to long term driven by an

expansion of the IT/ITES, biotech, automotive and the telecom sector. Old Mahabalipuram Road, being

developed as an IT corridor, as well as old industrial unit areas such as Guindy, Taramani, Ambattur and

Padi, are being converted into software technology parks. Presently, these locations do not have any major

hotel development. However a large catchment of IT/ITES companies and their captive boarding, lodging

and conference requirements will make these locations a viable business hotel market.

Large-scale IT developments along the Old Mahabalipuram Road as well as the development of the

Mahindra World City beyond the airport are changing the face of the real estate market in Chennai.

Also, with the infrastructure initiatives being undertaken by various local development bodies in Chennai,

the city is witnessing increased levels of interest as an attractive business destination in southern India.

Moreover, as the real estate market in the city is opening up and becoming more organised, participation of

national and international developers/funds in the development of IT parks, commercial buildings and

hospitality projects are likely to increase.

Thus, with the emergence of new business districts, the demand for hotel rooms to cater to the business

travellers will also increase. Besides, Chennai has a distinct advantage of having a long coastline, which can

be explored to develop leisure hotels, which will also serve to attract more leisure tourists in the city.

With the growing need for longer-stay options, the service apartment segment is another sector, which can

be explored in this segment. Though some service apartments exist in Chennai, there is an increased need

to develop these to their full potential on account of increasing demand from the IT/ITES segment together

with the manufacturing and processing industry. Some of the groups planning to enter this market segment

include Singapore-based service apartment major Ascott Group, which plans to develop a 200-room

project, and a few service apartment projects by Oakwood Group.

Outlook

Source: Knight Frank Research

Figure 29

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Heri

tag

e

Category-wise ARR

Rs.

Minimum Maximum

10,000

Kochi

Overview

Kochi is the commercial capital of the southern state of Kerala and has been an important port of India

since historic times. Being a coastal city, the economy of Kochi is driven by fisheries, shipping and allied

industries besides gold merchandising and export of spices. With the recent efforts by the Government of

Kerala to promote Kochi as an alternate IT/ITES destination, the investments in this sector are expected to

rise giving further boost to the city's as well as the state's economy.

The city acts as the gateway to Kerala by being well connected with the nation through all transportation

linkages. Kochi is a leisure destination and also acts as a transit point for the leisure travellers' onward to

backwater spots or hill stations. Over the years, Kochi has witnessed a change of clientele from leisure to

business travellers, with business travellers now constituting at least 50% of the total travellers to the city.

MG Road and Marine Drive, the key commercial locations of the city, have been the primary hub for

business hotels. Some of the major hotels in these locations are Taj Residency, Avenue Regent and

Gokulam Park Inn. Fort Kochi and Bolgatty, being major tourism spots have been favoured locations of

leisure hotels housing Malabar House and Bolgatty Palace, amongst other prominent hotels. Scarcity of vast

expanse of continuous land in these existing hospitality pockets, easy accessibility from the newly set-up

international airport at Nedumbassery, proximity to the emerging IT/ITES pockets of Kakkanad and

Kalamssery, have led new entrants to plan and launch premium star category hospitality projects at Maradu

and Kumbalam along NH-47 and its bye-pass.

Source: Knight Frank Research

Figure 30

5,000

4,000

3,000

2,000

1,000

--

2003

2004

2005

Year

Movement in ARR

Rs.

2006

6,000

Source: Knight Frank Research

Figure 31

68

66

64

62

2003

2004

2005

Year

Occupancy Rate

Perc

en

t

2006

70

Taj Malabar, Willingdon Island Le Meridien, Maradu

Current Scenario

As per industry estimates, Kochi had a 50-55% share of the total 7 million tourists coming to Kerala last

year. With the rapid expansion of the IT/ITES sector in the city, this share is likely to grow rapidly in the near

future. Currently, the hotel room demand generators are transit travellers and business travellers from the

shipping sector, marine and agro-export industries based in the city. BFSI and the telecom sectors have also

been significant contributors to demand in the past two years.

With an inventory size of about 988 rooms, Kochi experiences an acute shortage of rooms in peak season

(mid October-December). In 2006, the ARR achieved by five-star deluxe and five-star hotels was in the

range of Rs.3,575-5,700 while the ARR achieved by the heritage hotel was Rs.7,000. The four-star category

hotels achieved ARR in the range of Rs.2,800-3,000. Average occupancy level witnessed throughout the

year was 67%, with season (mid October-March) occupancy levels touching 70% leaving behind a

marginal gap of 5-7% less in slack season (April-mid October). The high occupancy levels in the city hotels

have been a result of major upsurge in the inflow of business travellers. This trend has continued even

during slack tourist season and created acute shortage of rooms during peak season.

Business travellers form approximately 80% of the clientele of hotels like Taj Residency on Marine Drive and

Gokulam Park Inn on MG Road. On the contrary, the heritage hotels in Fort Kochi like Malabar and

Brounton Boatyard have a significant share of leisure travellers as their clientele. Located close to the naval

base and shipyard, business hotels like Casino and Trident Hilton serve the corporate travelers in Willingdon

Island.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200722 23

Around 80% of the net revenue of business hotels is generated from rooms, 12-15% from the F&B segment

and 3-5% from the miscellaneous segment. As opposed to this, tourist traffic and MICE segment in leisure

hotels segment generates about 35% of the total revenue from the F&B segment while 60% of the revenue

is generated from rooms.

Knight Frank Research indicates that in Kochi a total of 1,238 hotel rooms are being planned or are under

construction. Of this, about 215 rooms shall be available by end-2007 and the balance by 2009. Though

the new supply is substantial, it will not bridge the mounting demand. Brands and corporates developing

hospitality projects in Kochi include Ramada, Hyatt, Holiday Inn, Intercontinental, Banyan Tree, Muthoot

Group and Middle East Company.

Business travellers from the IT/ITES and financial corporates at the Kakkanad Thripunithara belt and

Kalamssery, transit travellers passing by NH-47 and its bye-pass are the expected target segment, leading to

development of all upcoming hospitality projects in the vicinity of these pockets.

A strong focus on infrastructure development, proactive measures to promote IT sector, commerce and

tourism and effectively marketing Kerala as an attractive business and leisure destination shall directly

impact the future of hospitality industry in the state. Development in the sector shall be governed by

successful enactment of long impending state tourism policy and development control regulations.

According to a recent report by the World Travel and Tourism Council, demand of travel and tourism in

Kerala is expected to witness an 11.6% growth p.a between 2004-14, higher than any country or state in

the world. The boom in commerce, industry, trade and tourism will directly impact the rise in demand for

hospitality sector. It shall further narrow the gap in season and slack season with augmented ARRs and

occupancy levels all throughout the year till 2008. The additional supply of rooms by 2009 is expected to

create a competitive market environment and shall stabilise the ARR values, which are currently on an

upswing.

Kerala, known worldwide for its back waters, hill stations, eco-tourism and beaches, also holds the potential

for health tourism. There is a need for looking at parallel avenues of revenue from other hospitality

segments viz. service apartments, MICE with focus on NRI weddings and conferences, besides marketing

the already flourishing business line of ayurvedic spas. These emerging segments can be expected to get

increased clientele by way of business travellers frequenting the city on account of growth in the IT/ITES

sector in the city.

Outlook

Heri

tag

e

Source: Knight Frank Research

Figure 32

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

Minimum Maximum

ConclusionThe Indian hotel sector is witnessing high demand on the back of growth in business opportunities and

increased domestic tourism. This has led to a wave of unprecedented room rate realisations and occupancy

levels. Going forward, on account of supply lag, we forsee the ARRs to increase by 18-20% over the next

two years. Once all the under-construction and planned supply is brought in the market, there would be a

stabilisation, both in ARRs as well as occupancy levels. Some markets like Hyderabad and Pune, where the

supply is expected to outpace demand, there can be a slight drop in ARRs before stabilisation is achieved.

As we move ahead, the Indian hotel industry will see the emergence of two key trends - the spread to the

smaller towns and cities and increased capacity creation in the mid-end and budget segment. The Indian

hotel sector network which was till now limited to the metros and few large cities of the country, will now

be seen encompassing the smaller cities (Tier-II and III) which are currently under widespread real estate

activity. Positive economic outlook for these centers has led developers to build land banks, many of which

will house hotel projects to service the demand created.

Rising land costs in the metros and the tier-I cities have been pushing up the projects costs of hotel

developments. This has been reflected in higher ARRs and the construction of luxury and premium segment

hotels. Heightened business travel emanating from all sectors has led to increase in demand for budget

hotels that provide quality and efficiency in service. This demand is more pronounced in the existing

business and commercial centers. However, the rising land values in these cities have led to questioning the

sustainability and feasibility of budget hotels here. The cities like Mumbai and NCR have the least number

of such hotels because of exorbitant land costs.

Realising the potential for branded mid-market product, numerous foreign and Indian chains are planning

economy segment hotels in India. Some of these are Formule 1 (JV between Accor and Emaar MGF), Keys

(Burrgruen Hotels), Red Fox Hotels(Lemon Tree), HomeTel (Sarovar Hotels), etc. Already one brand, the

Ginger Hotels by the Taj group is operational in Hardwar and Pune and new projects are planned in Mysore,

Trivandrum, Durgapur, Panjim, Agartala, Tirupur Pondicherry, Baddi and Nashik. So, in times to come, the

development opportunity for mid-market segment has plenty of room to grow.

As the hospitality sector moves ahead, it is witnessing the advent of niche segments like spas and service

apartments which were earlier considered as low growth segments. Although primarily located in Tier-I

cities like New Delhi, Mumbai and Bangalore, the rising demand is seeing them spread to Tier-II and Tier-III

cities. Popular service apartments in Mumbai include Taj Wellington Mews, Lakeside Chalet Marriott

Executive Apartments, Grand Hyatt Residence, etc. Star city has six such properties in Chennai and Seasons

provides quality accommodations in Pune. Accor and Marriott are looking at setting up such properties in

Bangalore, Chennai and Kochi.

Resorts have become more specialised over the years and offer everything from spas to alternate

rejuvenations treatments. Major hotel chains are introducing spas in their luxury and business hotels to tap

this demand, for example, Taj has created its own brand Jiva while some other hotels have tied up with

international spa brands like Banyan Tree. Stand alone spa resorts are also gaining prominence, like Ananda

in the Himalayas in Uttaranchal and Angsana spa and resort in Bangalore. With the growth in medical

tourism, this segment will get the requisite clientele to sustain.

The hotel sector in India does project great opportunities but a lot needs to be done in order to realise its

full potential. Declaring this sector as high priority industry for foreign direct investment has been a step in

the right direction. Though this has cleared the way for capital infusion in this sector, investors still find

bureaucratic rules, infrastructure limitations, complex business practices, corruption as roadblocks to doing

business in India. Given the price sensitivity, high land cost and long gestation period, what is required the

most are requisite policy changes by the government. Till that is done, investors and developers will be

hesitant to venture in this segment in a big way.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 200722 23

Around 80% of the net revenue of business hotels is generated from rooms, 12-15% from the F&B segment

and 3-5% from the miscellaneous segment. As opposed to this, tourist traffic and MICE segment in leisure

hotels segment generates about 35% of the total revenue from the F&B segment while 60% of the revenue

is generated from rooms.

Knight Frank Research indicates that in Kochi a total of 1,238 hotel rooms are being planned or are under

construction. Of this, about 215 rooms shall be available by end-2007 and the balance by 2009. Though

the new supply is substantial, it will not bridge the mounting demand. Brands and corporates developing

hospitality projects in Kochi include Ramada, Hyatt, Holiday Inn, Intercontinental, Banyan Tree, Muthoot

Group and Middle East Company.

Business travellers from the IT/ITES and financial corporates at the Kakkanad Thripunithara belt and

Kalamssery, transit travellers passing by NH-47 and its bye-pass are the expected target segment, leading to

development of all upcoming hospitality projects in the vicinity of these pockets.

A strong focus on infrastructure development, proactive measures to promote IT sector, commerce and

tourism and effectively marketing Kerala as an attractive business and leisure destination shall directly

impact the future of hospitality industry in the state. Development in the sector shall be governed by

successful enactment of long impending state tourism policy and development control regulations.

According to a recent report by the World Travel and Tourism Council, demand of travel and tourism in

Kerala is expected to witness an 11.6% growth p.a between 2004-14, higher than any country or state in

the world. The boom in commerce, industry, trade and tourism will directly impact the rise in demand for

hospitality sector. It shall further narrow the gap in season and slack season with augmented ARRs and

occupancy levels all throughout the year till 2008. The additional supply of rooms by 2009 is expected to

create a competitive market environment and shall stabilise the ARR values, which are currently on an

upswing.

Kerala, known worldwide for its back waters, hill stations, eco-tourism and beaches, also holds the potential

for health tourism. There is a need for looking at parallel avenues of revenue from other hospitality

segments viz. service apartments, MICE with focus on NRI weddings and conferences, besides marketing

the already flourishing business line of ayurvedic spas. These emerging segments can be expected to get

increased clientele by way of business travellers frequenting the city on account of growth in the IT/ITES

sector in the city.

Outlook

Heri

tag

e

Source: Knight Frank Research

Figure 32

8,000

6,000

4,000

2,000

--

Five

-sta

rD

elu

xe

Five

-sta

r

Four-

star

Category-wise ARR

Rs.

Minimum Maximum

ConclusionThe Indian hotel sector is witnessing high demand on the back of growth in business opportunities and

increased domestic tourism. This has led to a wave of unprecedented room rate realisations and occupancy

levels. Going forward, on account of supply lag, we forsee the ARRs to increase by 18-20% over the next

two years. Once all the under-construction and planned supply is brought in the market, there would be a

stabilisation, both in ARRs as well as occupancy levels. Some markets like Hyderabad and Pune, where the

supply is expected to outpace demand, there can be a slight drop in ARRs before stabilisation is achieved.

As we move ahead, the Indian hotel industry will see the emergence of two key trends - the spread to the

smaller towns and cities and increased capacity creation in the mid-end and budget segment. The Indian

hotel sector network which was till now limited to the metros and few large cities of the country, will now

be seen encompassing the smaller cities (Tier-II and III) which are currently under widespread real estate

activity. Positive economic outlook for these centers has led developers to build land banks, many of which

will house hotel projects to service the demand created.

Rising land costs in the metros and the tier-I cities have been pushing up the projects costs of hotel

developments. This has been reflected in higher ARRs and the construction of luxury and premium segment

hotels. Heightened business travel emanating from all sectors has led to increase in demand for budget

hotels that provide quality and efficiency in service. This demand is more pronounced in the existing

business and commercial centers. However, the rising land values in these cities have led to questioning the

sustainability and feasibility of budget hotels here. The cities like Mumbai and NCR have the least number

of such hotels because of exorbitant land costs.

Realising the potential for branded mid-market product, numerous foreign and Indian chains are planning

economy segment hotels in India. Some of these are Formule 1 (JV between Accor and Emaar MGF), Keys

(Burrgruen Hotels), Red Fox Hotels(Lemon Tree), HomeTel (Sarovar Hotels), etc. Already one brand, the

Ginger Hotels by the Taj group is operational in Hardwar and Pune and new projects are planned in Mysore,

Trivandrum, Durgapur, Panjim, Agartala, Tirupur Pondicherry, Baddi and Nashik. So, in times to come, the

development opportunity for mid-market segment has plenty of room to grow.

As the hospitality sector moves ahead, it is witnessing the advent of niche segments like spas and service

apartments which were earlier considered as low growth segments. Although primarily located in Tier-I

cities like New Delhi, Mumbai and Bangalore, the rising demand is seeing them spread to Tier-II and Tier-III

cities. Popular service apartments in Mumbai include Taj Wellington Mews, Lakeside Chalet Marriott

Executive Apartments, Grand Hyatt Residence, etc. Star city has six such properties in Chennai and Seasons

provides quality accommodations in Pune. Accor and Marriott are looking at setting up such properties in

Bangalore, Chennai and Kochi.

Resorts have become more specialised over the years and offer everything from spas to alternate

rejuvenations treatments. Major hotel chains are introducing spas in their luxury and business hotels to tap

this demand, for example, Taj has created its own brand Jiva while some other hotels have tied up with

international spa brands like Banyan Tree. Stand alone spa resorts are also gaining prominence, like Ananda

in the Himalayas in Uttaranchal and Angsana spa and resort in Bangalore. With the growth in medical

tourism, this segment will get the requisite clientele to sustain.

The hotel sector in India does project great opportunities but a lot needs to be done in order to realise its

full potential. Declaring this sector as high priority industry for foreign direct investment has been a step in

the right direction. Though this has cleared the way for capital infusion in this sector, investors still find

bureaucratic rules, infrastructure limitations, complex business practices, corruption as roadblocks to doing

business in India. Given the price sensitivity, high land cost and long gestation period, what is required the

most are requisite policy changes by the government. Till that is done, investors and developers will be

hesitant to venture in this segment in a big way.

www.knightfrank.com

Knight Frank Knight FrankHotel Review - Quarter 2 2007 Hotel Review - Quarter 2 2007

www.knightfrank.com

The India Hotel Review is

prepared by Knight Frank

India Research.

General enquires should be addressed to:

Tel: +91 22 2267 0876

Fax: +91 22 2267 0899

Malvika Chandra

Sangeeta Sharma

Monica Babar

Amrita Sinha

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Maureeta Lopez

Anmol Haval

Binita Patel

Jyothi Shree Lakshmi

Sunil Vattekat

Vivek Jala

Gulam M. ZiaNational Director - Advisory Services

gulam.zia@in.knightfrank.com

malvika.chandra@in.knightfrank.com

sangeeta.sharma@in.knightfrank.com

monica.babar@in.knightfrank.com

amrita.sinha@in.knightfrank.com

chetanbir.kaur@in.knightfrank.com

maureeta.lopez@in.knightfrank.com

anmol.haval@in.knightfrank.com

binita.patel@in.knightfrank.com

jyothi.lakshmi@in.knightfrank.com

sunil.vattekat@in.knightfrank.com

vivek.jala@in.knightfrank.com

Research

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© Knight Frank 2007

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