One of the major drivers for investments pouring into the hospitality sector in tier-II cities like Mysore is the cost factor, says R. Krishna Kumar

The hospitality sector in Mysore is heralding a boom in property development by way of brand hotels three of which are expected to begin operations in due course.

While the accommodation expansion may be welcome in the long run, it may also contribute to reduced occupancy rates among the existing and new hotels in the short to medium run as supply will overshoot demand.

But this has not deterred major players like Raddison, ITC, and Royal Orchids to manage or invest in property in Mysore while another brand new property, The Quorum managed by The Park chain of hotels, is expected to throw open its doors for customers shortly. The city already has a plethora of luxury and heritage hotels catering to the corporate clients as also hotels catering to the salaried class and budget-conscious travellers.

International chains

But the investment in the luxury hotel segment continues unabated as is evident in the slew of new property coming up. The Sheraton is also slated to make its entry into Mysore through the Brigade group in a couple of year's time while the city has been listed as a probable site by international chains like Hyatt. All this is in addition to nearly 140 hotels and about 2,000 rooms that are already in place.

Industry observers attribute the development as an acknowledgement and realisation — by investors in commercial property and real estate development — of the rise in aspirations and expectations of tourists whose disposable income has increased and hence are prepared to splurge a little extra on quality services and accommodation.

The bulk of the property development is now focussed on tier-II cities like Mysore where the annual growth of tourists has surpassed expectations. The number of tourists visiting the city has increased from about 1.5 million in early 2000 to 3 million in 2011. The target is to double this figure in another seven to 10 years to keep the wheels of the tourism sector in Mysore revolving at a faster rate.

The cost is relatively low compared to investments required for developing similar property in cities like Bangalore, Delhi or Hyderabad. Again, investment in the capital-intensive hospitality sector is not undertaken without a projected supply-demand survey, all of which indicate that Mysore is an ideal place for property development.

Key challenge

However, experts in the tourism sector like K.S. Nagapati, Director, Mahajana Tourism Development Institute, point out that accommodation expansion being witnessed in a city may be a positive development to a certain extent. But the key challenge is to ensure that the occupancy rates are high and this can happen only if there was a significant rise in the corporate and business clients moving into the city.

The improved connectivity to Bangalore by way of the imminent completion of the railway track doubling and electrification work in two years' time is expected to herald a change in the city's demography and the occupational profile of the people. With reduction in commuting time, more people may travel between the two cities for regular work as also for business. This is also expected to increase the arrival of tourists.

But this may also lead to a situation wherein tourists, due to improved connectivity, will stay in Bangalore and visit Mysore for a brief whirlwind tour of the major places of interest and hence reduce their time spent in Mysore. This will make the investment in property redundant until the city's industrial sector picks up steam to draw a steady stream of business and corporate community.

Keywords: real estate