BackDelhi’s Aerocity hotels eye lower tariffs to drive business
Around 13 hotels adjacent to the Delhi airport that are looking to open soon may offer rooms at up to half the current rate
Premium(Move will mean that the occupants of the 43-acre hotel district set up by DIAL, known as Aerocity, will find it difficult to break even initially.)
New Delhi: Many of the dozen or so hotels adjacent to the Delhi airport that are looking to open soon may offer rooms at up to half the current rate charged by existing properties nearby to drum up business, said executives and analysts.
This could also mean that the occupants of the 43-acre hotel district set up by Delhi International Airport Pvt. Ltd (DIAL), known as Aerocity, will find it difficult to break even initially, they said.
Around 13 hotels, entailing an estimated investment of ₹ 10,000 crore, are due to open pending approval by security agencies as they oversee Indian Air Force hangars. DIAL, a consortium led by GMR Infrastructure Ltd that runs the Indira Gandhi International Airport, has leased the land to the hotels.
They include Lemon Tree Premier, Red Fox, JW Marriott, Holiday Inn, Aloft by Starwood Hotels and Resorts Worldwide Inc., Andaz by Hyatt Hotels Corp., Dusit D2 by Dusit International and three hotels by Accor SA.
Room tariffs at Aerocity hotels could start at ₹ 4,500 or lower per night excluding taxes. The cheapest room at the Radisson Blu, which is the five-star hotel nearest the Delhi airport, has a rack rate of ₹ 8,750 a night, excluding taxes.
Douglas Martell, vice-president, operations, South West Asia, InterContinental Hotel Group, which runs the Holiday Inn chain in the country, expects its Aerocity property to open by the end of the year.
“Our prices would range from ₹ 4,500 to ₹ 5,500 excluding taxes. With taxes, they might go up to ₹ 6,500. Considering our efficiency, we are hopeful that we will become profitable in six to eight months."
Martell said the hotel expects 40% occupancy to start with, but this also depends on when the other Aerocity hotels open.
Increased availability may keep tariffs low, said Pavethra Ponniah, research analyst at credit rating agency Icra Ltd.
“While the hotels coming up in the Aerocity area spread across price pocket ranging from economy to luxury, release of a large pocket of rooms in the market within a short duration may depress pricing power and occupancy," Ponniah said.
Competition will be intense, said Akshay Kulkarni, regional director, hospitality, South and South East Asia, Cushman and Wakefield.
“These hotels won’t be working in isolation. For example, a luxury product might be in a position to price itself different and be willing to take a hit on occupancy. On the other hand, a mid-market hotel won’t be able to take hit on occupancy with high prices," Kulkarni said.
“Airport hotels work on a philosophy that they will have to be at par with the market or even a little below the market to attract guests. They can’t charge more than the market just because of the prime location," he said.
The Lemon Tree group has had two properties—the upscale Lemon Tree Premier and the budget Red Fox—ready since last December and expects approval from the authorities to be imminent. Both hotels will have introductory offers.
“For Lemon Tree Premier and Red Fox, our published tariffs start from ₹ 8,000 and ₹ 5,500 (respectively), but our introductory offer will be ₹ 5,249 in addition to breakfast and airport pick up for Lemon Tree Premier and ₹ 3,749 with same facilities for Red Fox," said Aradhana Lal, vice-president, corporate communications and sustainability initiatives. “These offers may last for three-six months depending upon the competition. We will be pricing these hotels differently as per best available rates depending on supply-demand dynamics and how many other hotels come up in the same time frame."
The company has invested around ₹ 300 crore in the two properties, which have better interiors and more rooms than other hotels in its portfolio.
“It will be a very competitive environment depending on how many hotels open between 2013 and 2015. We would want to open up first and expect to become profitable in a year or so," said Lal.
The hotels that open first would have an advantage as competition will be less initially, Ponniah said.
K.B. Kachru, executive vice-president, South Asia, Carlson Rezidor Hotel Group, which operates the Radisson Blu chain in India, said the Aerocity hotels will impact occupancy and pricing power.
“Whenever new supply comes in, business can grow to a certain point. With suddenly so many hotels coming up, we won’t be able to hike our prices in October," said Kachru. “Our prices for the hotel near the airport may go down by 10-13%."
The gloomy economic situation in Europe is also a factor “as the growth momentum has been affected from our source markets", he added.
City hotels may not be affected as they cater to a different market segment and depend largely on brand loyalty, experts said.
“Opportunities exist for various brands to cater to different segments of the market mix," said Nakul Anand, executive director, ITC Ltd.
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