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The Gateway of India, Mumbai: The city remains an investor's dream

While the immediate prospects are not all that rosy, the forecast for the city looks good, with a rate rationalisation that can only help says Achin Khanna, senior associate, HVS

What makes Mumbai tick? Is it the fact that it is India’s largest melting pot? Is it the resilience of its people? Whatever may be the reason, the fact is that the city has an uncanny way of jumping right back onto its feet every time it is knocked down.

Mumbaikars were hit in the ribs by 26/11 and the pain lingers on. The global economic crisis hurt our financial capital more than any other major Indian city. The stock market here has witnessed some scary troughs in the recent past. However, the city keeps moving ahead - it grows, and it prospers.

The hospitality saga in Mumbai is interesting, and, while still relatively nascent (it has approximately 10,000 branded hotel rooms, compared to some 85,000 in New York or 135,000 in Shanghai), the growth story will certainly be one for the books.

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The year 2008/09 was a mixed bag. While the first two quarters went exceptionally well, the November attacks severely dampened overall occupancies across Mumbai. The city closed at 64% occupancy, down over ten per cent from the previous year. Consequently, this year is seeing a correction in room rates. This rate rationalisation, however, should help the existing hotels revive the business that they had lost to the unbranded segment in recent years. Overall, while the immediate outlook may not give many reasons for cheer, the good news is that the medium-to-long term forecast is strong. The Mumbai market is expected to see a revival of sorts in the next 12-to-18 months. While the proposed supply pipeline over the next three-to-five years is strong, there are several demand generators that are likely to boost demand for quality branded guestrooms across the metro city:

Supply: The Trident Bandra-Kurla Complex (BKC) and The Westin Goregaon, will open their doors for business this year. The Oberoi Nariman Point and The Taj Mahal (heritage wing), are slated for a grand re-opening shortly thereafter. Sofitel BKC, Ibis Andheri, Holiday Inn Saki Naka, and the Courtyard by Marriott, in Andheri, are also expected to follow soon.

Demand: The Bandra-Worli sea link opened for public use in early July. The bridge will provide a much- needed respite to weary travelers who need to go from north-to-south Mumbai and vice versa; hotels in both parts of the city are likely to benefit from this development as well.

The ongoing up-gradation and expansion of the Chhatrapati Shivaji International Airport is undoubtedly going to have a direct and positive impact on the demand for quality accommodation in the city. The airport is expected to cater to over 50 million passengers per year by 2025. Mumbai International Airport Limited is in the process of master planning a large mixed-use development around the domestic and international airport terminals. A large exhibition and convention center is also likely to be a part of this development; the metro city is currently starved of quality meeting space. The convention center will establish Mumbai as a MICE destination, which in turn will lead to substantial incremental room-night demand.