India has about 110,000 hotel rooms compared to 135,000.35 rooms in Shanghai. The Planning Commission estimates the scarcity at 150,000 rooms by 2010 reports the Economic Times. There are no reliable estimates of the number of service apartments as they are dominated by unorganised players. " In today's shortage scenario it appears that whatever one can build will be filled up," says Cushman & Wakefield Hospitality director (South Asia) Akshay Kulkarni.
But he predicts tariffs to fall by 15%-20% in 4-5 years as branded products become popular and unbranded ones die out. "The occupancy in the unbranded segment of the service apartments will actually drop as more and more limited-service, economy, branded products come to the fore. Without doubt the PRR for the developer or the manager will not be the same in the next 5 years," Mr. Kulkarni adds.
Experts also see international players digging into the Indian market. An example is Brigade Hospitality's tie-up with the European group Accor for the upcoming Mercure Homestead Residences in Bangalore.
"Our current occupancy levels are 75-80% throughout the year. We have 120 keys on offer and plan to have an additional 126 at Mercure Homestead. With our inventory increasing in a year or two, we see the occupancies settling down at about 75%," Brigade Hospitality CEO Vineet Verma says.
However, there are those who believe that it would be too optimistic to expect the good times to continue for the service apartments business.
"One has to look at the growth of the popularity of service apartments in context of the huge investments being made in hotels now," says Taj West End regional GM P K Mohan Kumar.
The market-share of hotels is bound to increase as there are about a dozen new hotels coming up in Bangalore alone, which will add 4000-5000 rooms to the existing inventory by 2012, he says. "As the mismatch in inventory gets corrected, and mid-market as well as budget hotels gain territory and share of the market, service apartments will become the last choice since hotels are now looking to accommodate long-term residents too." Being able to provide services tailored to the needs of customers is the USP of service apartments and the ones that can do so consistently have no need to worry, Brigade's Mr Verma says.
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