Amidst soaring construction costs, which have surged approximately 40%, hotel and mall developers in India are increasingly turning to imports from China to mitigate expenses and expedite project timelines. The trend has intensified, with costs climbing as high as 50%, according to various industry executives and suppliers. This influx of imports includes fully built rooms and utility items aimed at enhancing the efficiency of hotel construction.
Akshay Kulkarni, the director for South Asia at Cushman and Wakefield Hospitality, explains, “A lot of vendors in China are creating entire (hotel) rooms. Hotel operators can go there and choose the room fit-outs that they want for their hotels.” By adopting this approach, consultants claim budget hotels can significantly reduce construction time by 8-10 months, alongside cost savings of up to 40-50%. Typically, the construction of a hotel can take anywhere from 12 to 18 months, followed by an additional month for the fit-out. Kulkarni adds, “It cuts out a lot of costs in terms of time saving.”
As demand in the domestic hospitality sector continues to outstrip supply, expediting the readiness of hotel rooms not only benefits operational efficiency but also bolsters revenue streams. Even with ongoing expansion initiatives and new openings, India's hotel room inventory, projected to reach 150,000 by 2010, will still fall short by nearly 100,000 rooms based on current trends.
Notably, hotel chains like Sarovar Hotels Pvt. Ltd, which has ambitious plans for 35 new properties over the next three years, and Royal Orchid Hotels Ltd, managing nine existing hotels while aiming for a broader national presence by 2010, are key players importing goods. The range of Sarovar’s imports includes furniture, sanitary plumbing, electronic safes, hair dryers, and more, destined for new sites in Chandigarh, Hyderabad, and Bangalore. The Guangdong province of China has emerged as a preferred source for these imports; upon arrival in India, hoteliers simply assemble the prefabricated items into the basic room frames.
Ajay K. Bakaya, executive director at Sarovar Hotels, elaborates, “Guangdong has markets called a furniture city or lights city spread across a 10km stretch on either side of the road.” He notes that the only requirement is to have a local representative manage the process after placing the order, leading to substantial savings—estimated at around 50% when factoring in duties and a scheme linked to foreign earnings for capital goods.
The Sarovar Group collaborates with Blue Art Overseas Ltd, a logistics and sourcing company based in Hong Kong, which earns approximately 3% commission on the total value of shipments to India. Ramesh Nahata, CEO of Blue Art, states that for an average Chinese factory handling orders for 200-250 rooms, production takes about two months, with an additional month required for transit and customs clearance, and finally, around 10 days for assembly. In comparison, an Indian contractor would typically need four to six months for similar work.
Another emerging trend among mall developers involves the importation of prefabricated walls from China. An analyst monitoring the realty sector reveals that this approach has gained traction over the past few months as prices for steel have surged. “It helps developers cut costs by 15-20% and time by 30-50%,” the analyst states, opting for anonymity due to media restrictions.
Such import strategies offer developers and hotel chains a valuable opportunity to complete projects more efficiently, requiring less manual labor. Meanwhile, Royal Orchid Hotels remains judicious about its imports, sourcing only specific items such as artificial grass and hot plates from China. Keshav Baljee, vice president for corporate affairs at Royal Orchid, states, “It is not completely necessary to go to China for the entire hotel room, particularly not for our five-star rooms that require quality stuff. However, for our four-star rooms, we are looking at importing furniture, flooring, and marble from China.” He also notes that importing furniture can accelerate project timelines by 10-15% and flooring can yield cost reductions of about 20%.
In recent months, the upward trajectory of raw material prices has markedly impacted construction expenditures, driving costs for developers up by nearly 40%. Notable price increases between January and April include a 70% surge in pig iron, more than 36% for construction steel and wire rods, and upwards of 40% for hot-rolled coils.