That the hotel industry in India is in the midst of an unprecedented boom is painfully apparent to anyone looking for a hotel room in just about any Indian city – room rates seem to be on a relentlessly vertiginous rise including the most obscure third tier cities. Articles lamenting the seemingly outrageous hotel rates appeared around the world as recently as six months ago. While calls for a doubling of hotel inventory (from the current 110,000 rooms) have sparked a spate of foreign interest in joint ventures and FDI, there appears to be the first hints of a softening of rates and occupancies particularly in the most expensive Indian metro, Bangalore; a principal reason appears to be serviced apartments.
A larger problem for hospitality operators in India is the high rate of employee attrition. With attrition levels exceeding 30%, trained hospitality workers are fair game for retailers (reputedly the fastest growing in India) and the aviation industry, another boom industry in India. Old time majors such as the Taj group, the Oberois and ITC have long had their own training establishment and some newer entrants have also set up training institutions for their employees. Recent Indian entrants such as Lemon Tree hotels of New Delhi are not sitting back in their efforts at either training or in setting themselves apart from the others – the CEO of Lemon Tree, Patu Keswani’s idea of motivating his managers is to allow them to grow a ponytail!
However, with interest in India spanning the globe as this report on Irish investment in Indian real estate points out, investors should be prepared for the inevitable troughs that come when supply starts to pick up over the next two to three years. In the end, a lot more than growing ponytails may be needed for the many new entrants to partake of the recent boom.