Numerous prominent property developers are retreating from collaborations with major hospitality firms, including Royal Orchid Hotels and Ramada Worldwide, primarily due to the slowing cash flows within the real estate sector. This shift has prompted realtors to reconsider potential investments in the hospitality industry.
Developers active in various regions such as the National Capital Region (NCR), Bangalore, Chennai, and Pune are opting against proceeding with four and five-star hotel ventures. Reports indicate that a recent decision was made to shelve plans for a five-star hotel in Pune after its developer withdrew from the project.
Shivaram Malakala, the executive director of Habitat Ventures based in Bangalore, noted, "Developers are looking at realizing their money through any alternative resources and are thus in the exit mode." Nevertheless, Wyndham Hotel Group International, which oversees brands like Royal Orchid Hotels and Ramada Worldwide, has contested claims about project cancellations.
Sunil Mathur, director of international development for the Indian Ocean Region at Wyndham Hotel Group, remarked, "All our projects are doing fine. They could be delayed by a month or two but none of them have been shelved."
In Bangalore, it has been reported that approximately ten properties are currently available for sale, while NCR has over five such listings. The previous year bore witness to the proposal of more than twenty four-star hotels in Bangalore, out of which merely six are operational at this time.
A hospitality consultant from Mumbai explained that real estate developers are grappling with cash crises, with some properties—unfinished or otherwise—possibly being sold or paired with hotel companies seeking financial backers.
For instance, properties once valued at thirty crore rupees are now being sold at discounts ranging from Rs 25-50 lakh. Industry stakeholders suggest that this slowdown may create opportunities for larger players in the market, as hoteliers could acquire land parcels previously inaccessible to them.
Back in 2007, several international chains, including Hilton, Accor, Marriott International, Berggruen Hotels, Cabana Hotels, Premier Travel Inn, and the InterContinental Hotels group, made announcements to establish over three hundred five-star, four-star, and budget hotels, alongside fifty villas throughout India. These ventures predominantly involved partnerships with real estate developers, expected to yield around sixty-five thousand additional hotel rooms. This represented a significant increase, especially considering the total number of hotel rooms across all categories had only risen by 10% in the previous decade to approximately ninety-two thousand rooms.
Despite this promising outlook, analysts caution that the ongoing deceleration in the real estate sector could adversely affect the occupancy rates of hotels situated in metropolitan areas and leisure hubs. Currently, the occupancy rate in these metros stands at 75-80%, which is projected to decline to around 70% in the upcoming months as the off-season looms. An analyst indicated, "If the off-season is weaker than usual, there could be a downgrading of hospitality stocks."