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For want of a hotel room, a booming Mumbai stagnates
MARCUS GEE
Globe and Mail, Canada
February 20, 2008
MUMBAI -- Arriving in Mumbai at midnight after a 20-hour journey, I find my hotel has never heard of me. A night clerk flips through a stack of reservation slips. No such person. Producing an e-mail confirming the reservation leaves him unmoved. I can stay for one night, that's it.
The next day a travel agent searches every known hotel in the city for a room. All booked - except the Maharaja Suite at the Leela Kempinski for $2,000 (U.S.). I try to imagine explaining that item on my expense report.
Finally, a second travel agent finds me a $500 room at the Grand Hyatt, a walled oasis of luxury in neo-Dickensian Mumbai; but again, only for one night.
As I steel myself to join the millions of people living on the city's pavement, a distant cousin living in the city with her Indian husband invites me to stay at their place. Saved.
But why is it that the financial capital of the world's second most populous country has no hotel rooms to spare? And what does it means for the booming Indian economy?
To find out, I went to see Adarsh Jatia, director of the Indian group that put up Mumbai's new Four Seasons hotel, which opens next month. A gorgeous glass tower with rooms panelled in blond wood, it stands in splendid isolation amid a collection of shacks in a developing, but hardly glamorous, district.
Mr. Jatia tells me it cost $100-million to build. Rooms will go for $500 a night, about what an Indian farm labourer earns in a year. Filling those room will be a piece of cake. With India's can-do economy growing at around 9 per cent a year, outsiders are thronging to India to get in on the action - government delegations, corporate titans, business owners, inquisitive tourists. The government expects 10 million visitors a year by 2010, twice the current figure.
If I can't find a single room for the night, where are they all going to stay? India has only about 100,000 hotel rooms in the whole country. To put that in perspective, New York City alone has 74,000. In the four- and five-star category suited to business travellers, it has just 40,000 rooms. Mr. Jatia says it needs 100,000 more.
Things are so tight that in the information technology hub of Bangalore some business travellers have been forced to commute there from Hyderabad, an hour away by air. "Not many people are going to want to come to a country where you have to fly to another city to sleep," said Mr. Jatia, a suave 28-year-old in a pink shirt whose family partnered with Canada's Isadore Sharp to put up the Four Seasons. "India's reputation is at stake."
He's right. The hotel room shortage is a sign both of India's success and its failure. Its economic success makes everyone want to come here; yet in many ways it is failing to cope properly with the boom.
To fill the gap, big Indian and international hotel firms are rolling out ambitious plans for expansion.
An arm of the Hyatt group plans to open hotels with a total of 3,000 rooms over the next decade. Citymax Hotels India, a branch of Dubai-based Landmark Group, expects to open 30 mid-market hotels in the next decade.
It's not nearly enough. In the hottest market, Mumbai, Mr. Jatia says, just two major five-star hotels are under construction. Red tape discourages some potential entrants. Mr. Jatia had to get 150 government permissions for the project: permission to excavate, permission to build a basement, permission to build above ground level. He even needed permission to have music broadcast in the hotel, considered a public space.
Real estate prices are another barrier. Sky-high prices in Mumbai mean that it doesn't make sense to buy land just for a hotel. Since work began on the Four Seasons, the plot it sits on has increased in value by a factor of 10, to $200-million.
As demand for hotel rooms exceeds supply, the inevitable happens: prices soar. Average room rates are up 40 per cent in the past year alone, hardly an incentive to visit. American Express predicts that high-end Indian hotels will see another 38- to 41-per-cent rise in 2008, 34 to 38 per cent for mid-range hotels.
"The hotel bill is the first bill you have to pay," Mr. Jatia notes. "It makes you think: This is an expensive city to be in."
The hotel room crisis is a rather typical one for India. As the country charges into the 21st century after decades in the doldrums, everything is under stress: roads, ports, airports. Hotels, too, are an essential part of any modern country's infrastructure.
You can't do business without moving around and you can't move around unless you have somewhere to sleep.
India needs more hotels, and fast.
MARCUS GEE
Globe and Mail, Canada
February 20, 2008
MUMBAI -- Arriving in Mumbai at midnight after a 20-hour journey, I find my hotel has never heard of me. A night clerk flips through a stack of reservation slips. No such person. Producing an e-mail confirming the reservation leaves him unmoved. I can stay for one night, that's it.
The next day a travel agent searches every known hotel in the city for a room. All booked - except the Maharaja Suite at the Leela Kempinski for $2,000 (U.S.). I try to imagine explaining that item on my expense report.
Finally, a second travel agent finds me a $500 room at the Grand Hyatt, a walled oasis of luxury in neo-Dickensian Mumbai; but again, only for one night.
As I steel myself to join the millions of people living on the city's pavement, a distant cousin living in the city with her Indian husband invites me to stay at their place. Saved.
But why is it that the financial capital of the world's second most populous country has no hotel rooms to spare? And what does it means for the booming Indian economy?
To find out, I went to see Adarsh Jatia, director of the Indian group that put up Mumbai's new Four Seasons hotel, which opens next month. A gorgeous glass tower with rooms panelled in blond wood, it stands in splendid isolation amid a collection of shacks in a developing, but hardly glamorous, district.
Mr. Jatia tells me it cost $100-million to build. Rooms will go for $500 a night, about what an Indian farm labourer earns in a year. Filling those room will be a piece of cake. With India's can-do economy growing at around 9 per cent a year, outsiders are thronging to India to get in on the action - government delegations, corporate titans, business owners, inquisitive tourists. The government expects 10 million visitors a year by 2010, twice the current figure.
If I can't find a single room for the night, where are they all going to stay? India has only about 100,000 hotel rooms in the whole country. To put that in perspective, New York City alone has 74,000. In the four- and five-star category suited to business travellers, it has just 40,000 rooms. Mr. Jatia says it needs 100,000 more.
Things are so tight that in the information technology hub of Bangalore some business travellers have been forced to commute there from Hyderabad, an hour away by air. "Not many people are going to want to come to a country where you have to fly to another city to sleep," said Mr. Jatia, a suave 28-year-old in a pink shirt whose family partnered with Canada's Isadore Sharp to put up the Four Seasons. "India's reputation is at stake."
He's right. The hotel room shortage is a sign both of India's success and its failure. Its economic success makes everyone want to come here; yet in many ways it is failing to cope properly with the boom.
To fill the gap, big Indian and international hotel firms are rolling out ambitious plans for expansion.
An arm of the Hyatt group plans to open hotels with a total of 3,000 rooms over the next decade. Citymax Hotels India, a branch of Dubai-based Landmark Group, expects to open 30 mid-market hotels in the next decade.
It's not nearly enough. In the hottest market, Mumbai, Mr. Jatia says, just two major five-star hotels are under construction. Red tape discourages some potential entrants. Mr. Jatia had to get 150 government permissions for the project: permission to excavate, permission to build a basement, permission to build above ground level. He even needed permission to have music broadcast in the hotel, considered a public space.
Real estate prices are another barrier. Sky-high prices in Mumbai mean that it doesn't make sense to buy land just for a hotel. Since work began on the Four Seasons, the plot it sits on has increased in value by a factor of 10, to $200-million.
As demand for hotel rooms exceeds supply, the inevitable happens: prices soar. Average room rates are up 40 per cent in the past year alone, hardly an incentive to visit. American Express predicts that high-end Indian hotels will see another 38- to 41-per-cent rise in 2008, 34 to 38 per cent for mid-range hotels.
"The hotel bill is the first bill you have to pay," Mr. Jatia notes. "It makes you think: This is an expensive city to be in."
The hotel room crisis is a rather typical one for India. As the country charges into the 21st century after decades in the doldrums, everything is under stress: roads, ports, airports. Hotels, too, are an essential part of any modern country's infrastructure.
You can't do business without moving around and you can't move around unless you have somewhere to sleep.
India needs more hotels, and fast.