scan: Estate: The Hotel Cost Equation

The Hotel Cost Equation

Bhisham Mansukhani presents an overview of hotel development in the ten 
leading hotspots in the country and the costs involved in setting up 
hotels there...

As India braces itself for its biggest inventory infusion since 
international brands started to pour into the Indian market, the cost of 
building a hotel is suddenly a big question, asked in earnest rather 
than stray curiosity. Buoyant occupancies and a position of strength on 
the bargaining table with regard to rack rates have presently made the 
hotel industry inescapably attractive. Yet, the caveat is the sheer 
escalation of prices, both in terms of cost of basic inputs like steel 
and cement that faces the heat of global demand, as well as the cost of 
land in key metros.

While the cost of basic civil structure has increased in tandem with 
general levels of inflation, other factors such as land, raw material 
inputs, equipment and the frills have increased the overall cost 
substantially, compounding a capital intensive project which already 
suffers from a stretched gestation period. The pricing of construction 
materials has escalated in the past 12 to 18 months. The question for 
developers and economists is whether or not construction costs have been 
reset to a permanently higher benchmark. Higher prices for construction 
materials are now a concern with supply and demand trends forcing prices 
upwards. While hotel development traditionally competed with domestic 
housing and other commercial construction, the construction industry 
today is competing for materials and capital.

cont'd....
http://www.expresshotelierandcaterer.com/20051115/market01.shtml