Boom in hotel construction gives Goa a miss
Time-consuming approval process for compliance with the coastal regulation zone norms are often complicated and cause delay
No new rooms to be added in 2012
BY David Shaftel
With the global travel slump now a thing of the past, hotel construction is booming across India, and the value of hotel rooms in the country is set to increase by 60 per cent through 2013. But the boom is yet to reach Goa, a longtime jewel in the country’s tourism crown, because of several hurdles that include a robust bureaucracy; statewide corruption; archaic laws; and stringent environmental regulations.
A new study has highlighted that only a fraction of the new properties that are to open in India will be in Goa. Interestingly, no new rooms are to be added in 2012. According to consultancy firm Knight Frank India, which recently published a study on the hotel room market in India, from 2010 to 2013, around 1,744 new rooms are expected to come online in Goa, out of an estimated 35,977 rooms in the 10 metros that the firm studied.
Of these, some 1,256 new rooms will open in Goa in 2011, while none will come online in 2012. Only 160 are set to open in 2013.
“Goa is a bullish market for average room rates (ARR) because supply and demand are growing at roughly the same rate. The average three- to five-star room now costs Rs 6,500 to 6,700. It will cost Rs 7,700 by 2013,” said Samantak Das, the national head of research at Knight Frank.
But this is not so in the rest of the country, where room supply is fast outgrowing demand. Das said that through 2013, room supply would grow at a rate of around 15 per cent, while demand will grow at only around 10 per cent, translating into low or stable ARRs for three- to five-star deluxe hotels over that period.
“Of all of the new supply across India, Goa has the least coming online,” said Manav Thadani, managing director of property consultancy firm HVS-India. “Getting government approval in a state like Goa is different than in other states. Life is more difficult there when you’re dealing with the state government and the local panchayats. And we all know the reasons: bureaucracy and corruption,” Thadani said.
Thadani added that the approval process for compliance with the coastal regulation zone (CRZ) norms required by the Ministry of Environment and Forests for projects near the beach were often complicated and time-consuming, leading to much delay.
Also complicating things was the presence of archaic Portuguese laws left over from colonial times, said Partha Chatterjee, chief marketing officer, Keys Hotels, a mid-range hotel chain.
Chatterjee said that Keys, which has a hotel in the planning stages in Goa, has managed to avoid “related headaches” by hiring a local attorney to navigate the bureaucratic maze. “To be fair,” Thadani said, “the Alila Diwa Goa has opened recently, as has a Taj Vivanta property, and the Grand Hyatt is under construction. But this is nothing compared with what is happening in other cities in India.”
Take Jaipur, another tourism-driven city, said Knight Frank’s Das. In the three- to five-star range, demand is set to rise 8 or 9 per cent through 2013, but supply will spike by 15 per cent. This will translate to low ARRs in the short term, Das said.
“There are just higher barriers to entry in Goa. The local political interference is the worst in the country,” claimed Thadani. “And in a place which is supposed to be a key tourist destination.”