Rise of the 5 Stars – Hotels vs Serviced Apartments – Chennai

Rise of the 5 Stars – Hotels vs Serviced Apartments in Chennai

The trend in five star hotels in Chennai

Chennai has seen a major transformation in the hotel & hospitality industry this millennium,
where the rise of 5 Star hotels have multiplied over 200% in the past decade. Although
the market was initially dominated by the Indian giants (Taj & ITC), the global giants in
Starwoods, Marriot, Hilton, Hyatt, Radisson etc., have made their presence in the last few
years.

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Chennai is now home to the majestic ITC Grand Chola with over 600 rooms on the top of the
premium segment alongside The Leela Palace Chennai with a room inventory in excess of 360. There are other premium luxury properties by Westin, Park Hyatt etc. as the new entrants (in the
last 6-9 months) in the market.

With a sudden increase in the number of 5 star hotels in Chennai, the industry is already
experiencing a tough time in meeting their room reservation targets. Further, the overall
contribution from other revenue centres like Food & Beverages is also not very encouraging
because there are very few walk-in customers. Considering that more than two-thirds
of Chennai hotel reservation is from the business segment, the overall industry slowdown
& economic downturn is hurting the hotel industry, Approximately about 3500 rooms are
shared between the hotels in the top segment (ITC Grand Chola, Leela Palace Chennai, Park Hyatt, Starwoods, Taj group, Sheraton, Rain Tree, Radisson and others). Giving them a close & tough fight are home-grown hotels like GRT Grand, Accord Metropolitan, Residency Towers etc. who have an edge with their strong understanding & network in the local market, significant number of walk in customers in addition to tapping the leisure travellers.

The interesting element is the addition of another 2500 rooms in the 5 star category in the
next 12-15 months. With many of them midway in the development of the properties and
an equal number of properties in the 3/4 star category, Chennai is going to experience high
action & growth in this segment. So what happens when you have 5000 rooms + economy
downturn + pricing pressure???

While you deliberate on the answer, there is a silent boom in the “serviced apartments”
category – The serviced apartments trend is really catching up with the IT & Wedding
industry being the biggest consumers of this segment so far. A decent and comfortable
serviced apartment with 3 rooms, accommodating up to 6 persons is priced just over Rs.4000 as compared to a single room in a 3/4 star hotel. Of course, it is not right to compare a a
luxury hotel to a serviced apartment – but considering a growing segment of customers who
are becoming price-conscious, the two segments (Serviced Apartments vs Star hotels, 3 star hotels and 4 star hotels) could lock horns in the near future.

Ultimately though, with all this growth, the customer will be “King”, shall have access to a
wide choice & variety to choose from and is bound to have the last laugh!!!