Oakwood could force a tariff drop

Oakwood could force a tariff drop
Anshul Dhamija | TNN

Bangalore: A shake up in the luxury hospitality landscape in Bangalore looks imminent with newer players entering the market.
On Monday, Oakwood Worldwide checked into Bangalore with a 177-units serviced apartment complex in UB City. An entry-level studio apartment, which is close to about 46 sqm in size — roughly 9-10 sqm more in space than an entry-level room at a 5-star property — comes at a rack price of just Rs 10,600 a night.
And it comes better equipped than some of the competing properties, with a compact bedroom-cum-drawing room, a kitchenette, a shower area attached with a dryer and washer, complimentary breakfast, daily room service and access to a roof-top swimming pool-cum-gym-cumspa. The company says corporate discounts could go up to 30-35%, which means you may be able to have the studio apartment at a price of Rs 7,000.
Oakwood’s tariff is 20-25% less than what other 5-star properties in the city are today offering. Out of Oakwood’s total inventory of 177 rooms, 141 rooms would directly compete against those in leading 5-star hotels to lure the short-stay guests. The others are two and three-bedroom apartments.
“We are looking to achieve a 60:40 ratio in the number of short-stay guests (1-3 days) to long-stay guests (4 days and above),” says Praveen Nair, country manager-India for Oakwood. Typically, around 90% of a 5-star hotel’s occupancy comprises of short-stay guests.
According to Taposh Chakraborty, CEO Boutique Hospitality Consultants, a property like Oakwood could take away 25-30% of inventory per day from existing star properties in a radius of 2-3 km. “Besides, its central location and having a captive feeder market in UB City could prove disadvantageous to other players,” he said.
Chakraborty adds that the addition of another 177 rooms could lead to a further price correction in the average room rates (ARR) of hotels.
Anand Rao, GM of The Windsor, The Luxury Collection, agrees that such serviced apartments could create further softening in ARR of star properties. Currently, the ARR of the luxury segment hovers between 13,000 and Rs 14,000, down from the starry heights of Rs 20,000 that one paid less than three years ago.
“The biggest market that would be impacted though would be the unbranded serviced apartments, which have mushroomed in Bangalore, and which are priced at Rs 4,000 to Rs 5,000. Also, travelers staying at 4-star hotels would not hesitate to pay a couple of thousands more to stay in luxury,” says Chakraborty.
Oakwood is coming up with another property called Oakwood Residence Ozone in partnership with the Prestige Group at Whitefield. This is slated to be ready in the third quarter of 2010. Hilton’s serviced apartment in the Embassy Golf Link Business Park, off the road connecting Indiranagar and Koramangala, is expected to be operational some time next year. A Marriott serviced apartment in Indiranagar and a Four Seasons one near Mekhri Circle are expected to be operational in 2011.