Government Confident About Averting Room Crunch

Delhi’s projected shortage of hotel rooms for the 2010 Commonwealth Games will not be a problem because the government’s measures are working, says the country’s tourism ministry.

Speaking to hospitality professionals and investors at the Hotel Investment Conference South Asia, Amitabh Kant, joint secretary, ministry of tourism, said the government estimates that 30,000 additional rooms are needed for the Games and tourism in the National Capital Region. Of this, 26,780 rooms will be built by 2010. He predicted that occupancy rates in the Delhi area will be down to about 60% by 2010, and the stabilization of room rates will follow.

Kant said the government has identified over 65 sites in the National Capital Region to provide for 14,780 rooms in Delhi, 8,000 rooms in Haryana and 4,000 rooms in Uttar Pradesh. The ministry has said that the rooms are needed not just for the Games but also for general tourism.

“When you have a major sports event, you can compress the time frame for the development of rooms,” said Kant. He said the government was accelerating efforts to ensure the rooms are built on time.

The ministry of tourism has long argued that the Delhi area needs more room for the Games, and helped push through a five-year tax concession in the recent budget for two, three and four-star hotels constructed in the Delhi area before 2010. It has also pursued a variety of other schemes—from encouraging home owners to offer Bed & Breakfasts to asking land-owning agencies like the Delhi Transport Corporation, the local bus agency, to convert their land into hotel rooms.

Manav Thadani, India head for HVS International Inc., a hospitality consulting firm, agreed that “as supply comes in, you will see a rate rationalization”. According to a report released by HVS last year, the Delhi area’s occupancy rate has gone from 53.3% in fiscal 2002 to 81.7% in fiscal 2006. Average room rates over the same period rose 55.8% to Rs6,759 a night, it said.

Kant said that there is currently “an acute supply shortage” of almost 70,000 rooms in the country as a whole, with a need for 150,000 rooms within three years to meet increased leisure and business traffic. Foreign arrivals to India increased 13% last year to 4.4 million.

In addition to the estimated room shortage, other speakers at the conference focused on the difficulty in retaining skilled labour in the hotel industry, the high cost of land for hotel development and India’s potential as a business destination—a primary driver for the hospitality and tourism industries.