No Hotel Rooms in India

The NYT has an interesting article about the shortage of hotel rooms in India. The situation in Bangalore is really bad, and I know from the personal experience of a very good friend that people sometimes fly in and out of Bangalore the same day because they cant find a hotel room to stay in at night.

Addressing a Shortage of Hotel Rooms, Not People

MUMBAI — With its ultrachic restaurant and sweeping views of a 16th-century tomb, the Oberoi in New Delhi is a hotel of choice for the deal makers pouring into India.

But unless you planned your trip months ago, there is little chance of finding a vacancy. The 279 rooms and suites are fully booked almost every night until April at prices that start at $345 a night, breakfast not included.

Demand for hotel rooms is soaring in India as its economy blossoms. Foreigners are flooding in to cut deals, attend conferences or just discover the caves of Ajanta and the sands of Rajasthan. The rise of low-fare airlines is also bringing domestic air travel within reach of more Indians, who, until recently, had little chance of ever boarding a jet.

Yet for all those travelers, India offers only 110,000 hotel rooms. China has 10 times as many, and the United States 40 times as many. The New York metropolitan region alone has about as many rooms as all of India.

The shortage is pushing peak season rates for basic rooms into the stratosphere, by Indian standards, and attracting some of the world’s best-known names in hotels — Accor, Hilton, Wyndham, Pan Pacific — to invest heavily in India.

“There’s enormous potential here,” said Dennis Oldfield, the general manager for the Indian branch of Accor, a French group with 4,100 hotels worldwide. Accor has plans for up to 200 hotels in India within a decade.

Meanwhile, business travelers are trying to cope.

Two female Indian employees of a top management consultancy based in New York were recently forced to share a bed in a company apartment because there were no decent hotel rooms available in the city they were visiting, according to one of their colleagues, who did not wish to be identified.

Microsoft is using its own Live Meeting videoconferencing technology to cut down on business trips, said Ravi Venkatesan, chairman of Microsoft India.

In Bangalore, rooms are so costly that traveling salespeople and other professionals often commute by air from as far as Mumbai, 620 miles away.

“They are making you fly to Bangalore every day in the morning and fly back every night because it’s cheaper than paying the hotel bill,” said Saurabh Gupta, an analyst in the Indian office of HVS International, a hospitality industry consulting firm.

Infosys, an Indian software giant with 66,000 employees worldwide, has built its own 500-room hotel next to its headquarters in Bangalore. By June, it expects to have 15,000 company-owned rooms across India — nearly an eighth as many rooms as the entire country has, and more than any Indian hotel chain.

Putting an employee up for a night at its Bangalore campus hotel costs Infosys $15, and the guest gets three-star treatment that would normally cost $150, by the company’s estimate.

“It’s much more efficient in India to do it yourself,” said T. V. Mohandas Pai, director of human resources at Infosys.

The high prices are all the more striking in a low-wage country like India. At a $500 rack rate for the five-star rooms favored by business travelers, a hotel employee earning minimum wage here would have to work about a year to pay for one night’s stay, versus about two and a half weeks’ work for an American earning minimum wage.

And even though the Chinese earn twice as much as Indians on average, India has the more expensive rooms, according to a recent edition of Travel Business Analyst, an industry newsletter. Comparing rooms of similar quality, suitable for business travelers, a room in Delhi cost $187 on average this year, versus $122 in Beijing; a room in Mumbai was $178, versus $150 in Shanghai.

High prices discourage tourists, industry specialists say, and the shortage of rooms, along with other infrastructure woes, offers one reason a country with the petal-covered lakes of Kashmir and the palm-lined shores of Kerala lags behind in tourism.

Compare India, a country of 1.1 billion people, to New York, a city of 8 million: New York attracted 6.8 million foreign tourists in 2005; India attracted 3.9 million.

The Indian government also recognizes that, by some industry estimates, hotels employ 180 people for every 100 rooms, and it is now scrambling to expand supply.

It recently paid for half-page advertisements in Delhi newspapers that urged families to convert their homes into bed-and-breakfast operations, which can charge about $35 a night. The government’s goal is to approve enough homes-turned-hostels to offer another 10,000 rooms in time for the Commonwealth Games, an Olympic-like event, in 2010, which will be held in New Delhi.

“We should not be turning tourists away,” Ambika Soni, the Indian tourism minister, said in a telephone interview.

Some hotel executives blame the government for sticking to decades-old laws that limit the amount of land for sale and drive up prices.

Because of the Indian real estate boom, land is so expensive that the Taj group of hotels, a chain with 7,000 rooms across India, has found that the reserve price at land auctions makes building a hotel not financially viable, said Ajoy Misra, the group’s sales and marketing chief.

Ms. Soni said she was pushing for a 10-year tax rebate for new budget hotels, as well as encouraging Indian Railways to give up some of its vast land holdings for track-side hotels. To avoid the spiraling auction prices, the government may soon purchase land and lease it out cheaply to hotels.

Amitabh Kant, a senior official in the Tourism Ministry, said $6.5 billion was being invested in hotel-building, and 140,000 new hotel rooms were expected by 2010. More conservative assessments put the figure at 70,000.

Hilton has won approvals for 75 new hotels in India by 2010, Mr. Kant said. Ramada Hotels recently announced a partnership with Royal Orchid, an Indian company, to build four- and five-star properties nationwide.

The Taj group, which has long focused on the affluent, is introducing $22-a-night hotels called Ginger, and plans to build 100 of them within five years. And Accor has announced plans, along with Emaar, a developer in Dubai, to invest $300 million to bring 100 of its Formule1 hotels to India. Accor will also bring Sofitel, a plusher chain, to Mumbai.

Starwood Hotels plans to invest hundreds of millions of dollars to build scores of hotels across India, said Stephen Ford, the chief of the company’s South Asian operations. The expansion will include brands as diverse as Sheraton, Westin, Le Meridien, W and Aloft, an $80-a-night, low-frills hotel for business travelers.

“We’re very confident that there’s a huge need for hotel bedrooms,” Mr. Ford said, “and that’s why we’re here.”

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