Track2Realty Exclusive: In 2010 when Le Meridien Coimbatore, a Rs. 300 crore project of Appu Hotels, announced to open a nine-storeyed hotel with a total built-up area of seven lakh sq ft, spread across a 6.75 acre plot, there were not many takers. The critics either termed it as an over ambitious project or a venture that was ahead of time.
Who would have believed at that point of time when even in Chennai, five-star hotels were dependent mainly on multi-national companies, corporates and the affluent, the Coimbatore with the larger middle income segment would have a market for that. However, the city has indeed scaled up on the demand of quality hotels since then.
Within a short span of time the critics were forced to eat their own words and today many big ticket hotel projects like Choice Hotels India, the wholly owned subsidiary of Choice Hotels International, are coming up with the grand opening of their new property under their upscale brand Clarion namely Clarion Hotel Coimbatore. Most importantly, hospitality has emerged as a serious business in the city, even though the real estate developers have thus far not been looked at this segment as seriously as the residential or commercial establishments.
Analysts believe Coimbatore, which has a fast-growing industrial sector, strong educational infrastructure, location advantage with neighbouring towns that have extensive international business exposure, is all set for a leap in the hospitality sector. Many even maintain that contrary to the general perception people in the city have the spending potential, ability and desire to spend but the avenues have been pretty limited.
But with the success of a couple of ventures the entire ballgame has suddenly started changing and now more projects are likely to follow here in the hospitality sector. Nearly all the big hospitality brands have set their eyes on the Coimbatore market which promises to strengthen the market for hotels and, in turn, help the local economy grow even further.
The demographic pattern, social outlook and economic cycle are also changing fast in the city. Facts speak for themselves. Coimbatore has several engineering colleges and Universities, the Tidel Park, etc. The city has a good mix of consumers and creation of more quality hotel projects is the need of the hour. This is the time for second-tier development of hospitality sector in the city after a couple of big hotels have strengthened their presence.
Many analysts believe the growth of hospitality in this country now onwards is actually in the tier-two cities like Coimbatore. A number of international visitors come here and several major and even small scale companies in this region have overseas contacts. Many of the foreign visitors who come to Tirupur, Karur and Erode, stay in Bangalore and Chennai. Given the quality hotel stay, they would prefer to stay in the city while on business trip.
This raises a fundamental question as to why the developers have not forayed into hospitality sector in this market even though Coimbatore has shaped up well as a business destination. The developers cite their own reasons ranging from the policies of the state government, to opportunity cost and hurdles in the clearances as compared to the residential projects.
R.S. Krishnan, Head-Operations-Site, Rakindo Developers blames it on the logistical reasons. According to him, Coimbatore has major infrastructure shortcomings. Lack of power, proper roads and scarcity of water makes it unattractive for major developments. The fallout and decline of the textile and hosiery business (closure of dyeing units) have resulted in the negative growth of this city. Most of the existing hospitality start-ups have all failed. Hence, Coimbatore is a strict no-no destination for hospitality.
“Despite being the second largest city in Tamil Nadu, lack of political will and lack of political impetus on the part of successive governments has left Coimbatore lagging behind on several fronts making it almost impossible for any developer to foray into hospitality. Participation of national and international hotel chains is the only option that could prove beneficial to the hospitality sector as the industry itself has proven that stand-alone hotels are not successful business options,” says Krishnan.
A section of the developers suggest the government to make the hospitality foray more attractive from execution standpoint since the opportunity cost is high and the gestation period is too long. They suggest either single window clearance for the hospitality projects or fast tracking approvals and clearances, special status given to hospitality projects and development of supporting facilities like roads, infrastructure, power and water to make the project sustainable.
Beyond these teething issues lies the fact that Coimbatore is poised to grow on the hospitality map of India. The way the city is growing with its vibrant economy, it is quite natural that the big hospital chains would like to tap the potential of the Coimbatore economy. A few years back, hotels with facilities like a ball room, an exclusive spa and health club, multi cuisine restaurants, imported chandeliers from Italy etc were unheard of in this part of the world. Today, some of the upcoming hospitality groups are clubbing entertainment centres with the hotel itself.
Analysts maintain the very economy of Coimbatore is such that MICE (Meetings, Incentives, Conferences and Exhibition) segment can be catalysed with the policy incentives which will further ignite the economy of the city. They suggest it is time Coimbatore should be promoted as tourism destination, something that will attract developers from other big cities to invest in the city. After all, the land cost and overall opportunity cost is pretty low when compared with the other markets.
It is true that the developers have thus far resisted investing into high capital intensive hotel projects. But many of the big ticket developers are also realising that there lies a big market in the segment of urban resort. They are hence in talks with the big chain of hospitality brands for a possible tie-up. Of course, there is a cost-benefit analysis that prohibits the developers to jump into a new segment, yet the potential is so huge that sooner or later many of them will weigh their options in favour of a foray into the hospitality sector.