Given the volume of inventory entering the Chennai hotel market in the next couple of years, occupancy levels in the city will come down, says HVS Global Hospitality Services.

The consulting and services organisation, focused on the hotel, restaurant, shared ownership, gaming and leisure industries, says demand will grow in the near future, but the increase in supply will make occupancy levels decline in the next couple of years. “We would not recommend developing any more hotels in the luxury and upscale spaces in Chennai for the next few years,” says Mr Kaushik Vardharajan, Managing Director (South Asia), HVS Global Hospitality Services.

With half a dozen top-end luxury brands – Westin, Park Hyatt, ITC Grand Chola, JW Marriott, Leela Kempinski – pitching in for a share of the same pie in the months to come, the rates will come under further pressure. In the next two years, Chennai will add another 2,500 rooms to its existing 3,000 rooms in the five-star category. Of this at least 2,000 rooms will be in the ‘top-end luxury' segment.

Chennai has historically shown greater choice in the mid-market segment. The new luxury and upscale hotels being developed in the city at present will provide additional choices for travellers looking for a more upgraded hotel product.

For example, he said, a hotel such as Grand Chola, with an extensive amount of meeting, conferencing and banquet space, can create additional meeting and group demand for itself and also for other hotels in the market.

However, considering the current occupancy levels in the city, these new hotels cannot price their products above a particular level. Hence, the existing five-star hotels may have to cut rates further in order to compete with them.

> rravikumar@thehindu.co.in

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