Sriperumbudur an attractive destination for hotel investors, says JLL study

C Shivakumar

Chennai:

As Chennai is emerging as India’s bustling business destination with the auto majors and services sector dotting Sriperumbudur, a real estate study says the region will become an attractive and desirable market for hotel investors and operators.

According to Jones Lang La Salle’s ‘Hotel Intelligence Report’, Sriperumbudur is emerging as a significant growth corridor with no branded hotel supply to date as a result this will make the region attractive and desirable for hotel investors.

Chennai currently has 29 hotels with an inventory of 4,656 rooms. The existing supply in Chennai is expected to experience a significant increase with an upcoming inventory of 3,620 rooms spread across 17 hotels within three years.

As a result of growing demand, occupancy levels have been fairly stable during the past four years. However, with a continuous addition of branded supply, the market has witnessed a decline in average rates. Because of this, there has been an

11 per cent decline in revenue per available room since 2008-09.

And JLL study expects marketwide average rates and occupancy levels to remain constrained as new supply opens in 2012 and 2013, with a high proportion of new rooms in the luxury and upper upscale segments.

But this adverse impact is expected to be short-lived with significant commercial and industrial developments planned across the city, the report states.

According to Jones Lang LaSalle Hotels’ research, there are 17 hotels currently under construction in the branded segment in Chennai with a total inventory of 3,620 rooms. However, this number

excludes an inventory of almost 2,500 rooms that are currently in various stages of planning and  expected to hit the market within the next five to seven years.

It should be noted that the bulk of the upcoming supply is being developed along OMR albeit with

a number of projects planned in Sriperumbudur and thus can be referred as the future growth corridors for Chennai’s lodging market.

The majority of the upcoming supply in Chennai will be in the luxury segment (35 per cent), with fewer rooms planned in the midscale (25 per cent), upper upscale (18 per cent) and economy segments (15 per cent). Serviced apartments and upscale segments contribute only 4 per cent and 3 per cent

Respectively.

Box:

Micro Markets in Chennai

Central Business District (CBD): Being a state capital, Chennai CBD houses various government departments, head offices of major companies, high-end residential as well as retail space. This micro

market also features a large number of branded hotels primarily in the upper upscale and luxury segments. The CBD comprises areas

such as Egmore, Mount Road and MRC Nagar.

Secondary Business District (SBD): SBD comprises areas along Inner Ring Road, Velachery Road, Anna  Nagar and Guindy, to name a few. This micro market features offices of primarily BFSI (Banking,

Financial Services and Insurance) companies. Because of this and its close proximity to the airport, a number of hotels including Hilton, Trident and Radisson have come up in the micro market.

Peripheral Business District (PBD): This micro market comprises of GST Road, Old Mahabalipuram Road (OMR) and Sriperumbudur. OMR features large built-to-suit campuses of primarily IT/ITeS

companies, often referred to as the IT corridor of Chennai, whilst Sriperumbudur is an  industrial/manufacturing hub that houses

manufacturing facilities of companies like Nokia, Hyundai, Caparo and Saint-Gobain.

(Source: JLL)