TajGVK, a joint venture between Tata-owned Indian Hotels and the Hyderabad-based GVK group, is going slow on its earlier plan to put up a luxury hotel in Bengaluru.
The construction of this hotel has been deferred by four years.
The company had acquired a part of the land near Yelahanka, on the road to the city's international airport.
The airport is being maintained by a group company, GVK Infrastructure.
"We have acquired about six acres of land in Bengaluru. There are a number of hotels coming up in the city. Competition will grow as a result of it and it will remain so for the next two years. We will begin construction once competition settles down.
That could take another three to four years," G V K Reddy, chairman, TajGVK Hotels and Resorts, told Business Standard.
Industry experts agree Bengaluru has seen an oversupply of hotels in the past two years.
"Occupancies and average room rates in the market have not seen a bounce-back as sharply as they have in Mumbai and Delhi. ARRs in Bengaluru are in the range of Rs 7,000, while in Mumbai and Delhi, they are close to Rs 9,000. Earlier, ARRs in Bengaluru were in the range of Rs 9,000-12,000," said
Himani Singh, analyst, Elara Capital. Analysts also feel a bounce-back in occupancies and room rates might not be possible in this financial year.
TajGVK owns and operates four luxury hotels -- Taj Krishna, Taj Banjara, and Taj Deccan in Hyderabad, and Taj Chandigarh.
The company is also planning to commission a hotel in Chennai. While GVK will oversee the construction, management and development of these hotels, Indian Hotels, being a hospitality major, will oversee the maintenance.
Budget brand plan
GVK is planning to take its association with Indian Hotels further, as it is partnering with the company's budget hotel brand, Ginger, as well.
The company plans to open a chain of six Ginger hotels across Andhra Pradesh and has started construction on the first 250-room property near the new international airport in Hyderabad. Each of these hotels will typically attract an investment of about Rs 15-20 crore (Rs 15--200 million) each.
Analysts feel budget hotels have a lot of potential demand, as India has an under-supply of fairly priced rooms. Most of the demand for these hotels could come in Mumbai, Delhi, Hyderabad, Chennai and Bengaluru.
"The only alternative is guest houses, which are low in hygiene," said Singh.
In addition to Ginger, hospitality companies like Tune Hotels and Lemon are some other chains eyeing this opportunity. TajGVK believes budget hotels have a lot of potential, in spite of many hotel chains looking at the low-cost sector.
"We will see a lot of demand for budget hotels. The typical room rent is around Rs 2,000 per night in these hotels, with all sorts of amenities.
The economy of the country is growing and more people are travelling, resulting in the need of these hotels," said Reddy.
TajGVK's stock traded flat on the exchanges on Friday and closed at Rs 159 per share.
