Parallel economies

Comment, Hospitality Trends

Mumbai has been at the forefront of the Indian development and has over the past two decades witnessed tremendous economic growth. The city has been the nerve cell of the economic growth of the country with most major financial and corporate businesses being headquartered in the city. As the epicenter of India’s growth, Mumbai has always attracted new settlers arriving from different parts of the country. The growing economy and increased population resulted in the city growing into its suburbs to assist itself in managing growing housing and infrastructural demand which further led to a significant increase in area covered in the Mumbai region. Today, Mumbai includes the City of Mumbai, Mumbai Suburban, Thane, Navi Mumbai and other small urban areas, otherwise known as the Mumbai Metropolitan Region (MMR). The total area it covers is 1,176 sq. kms. This entire region holds a population of 20.7 million at a density of 16,662 per sq. km.
Thane and Navi Mumbai are Mumbai’s satellite cities and being en-route to cities of Nasik and Pune respectively, has further infused growth in their respective economies. These cities have assisted Mumbai’s burgeoning demand for growth.

Thane is the most populous district in India and industries, across various sectors, form the mainstay of its local economy with Thane City as its centre. The city spreads across an area of 128.23 sq. km and as per 2011 census, has a population of 2.4 million. It has, over the last decade, witnessed rapid urbanisation leading to residential and commercial development. A high percentage of the skilled work force residing in Thane is employed in the Greater Mumbai region. Though spill-over development from Mumbai has played a pivotal role in the local economy, the city is a major hub for mid and small scale industries.
In contrast to Thane, the township of Navi Mumbai was specifically created to help ease the burden of Mumbai’s growth. It’s development was initiated in 1972 and is the largest planned city in the world. The city, as per 2011 census, has a population of 1.1 million and covers an area of 193.94 sq. km. Similar to Thane, Navi Mumbai has witnessed incredible growth in economic activity. However, its close proximity to Pune and development across the Mumbai-Pune Expressway has further boosted the local economy giving it an edge over Thane. Numerous IT parks dot Navi Mumbai’s commerce landscape and the announcement of an international airport in Panvel has made the region an attractive investment option.

The hospitality market in Navi Mumbai has grown tremendously over the last two years with numerous hotel openings in the city. Comparatively, Thane’s hotel market is still at a nascent stage with only one branded hotel. Navi Mumbai has a total of 1,612 rooms with 1,326 rooms belonging to the organised segment, while Thane only has 466 rooms with one hotel from the organised segment. This disparity is a result of pace of progress and economic development between the two cities.
Navi Mumbai has a clear edge when compared to Thane in terms of hospitality. The slight drop in ARR for Navi Mumbai is a result of increase in supply over the last two years with an addition of 387 rooms in 2012–2013. Thane, though with its limited supply of rooms, achieved an ARR of INR 3,986 for 2012–13. The corporate demand in Thane is still low compared to Navi Mumbai, but a steady rise in occupancy has been registered over the last two years.
Navi Mumbai registered an ARR of INR 4,250 as of 2013, a decrease by two per cent over 2012. Occupancy rates remained stable at 57 per cent in 2012 as well as 2013. While ARR had decreased by four per cent in 2012 over 2011, there was a three per cent increase in AOR during the same period. The decrease in ARR is mainly due to added keys in the micro-market with over 24 per cent in 2012 over 2011. However, 2013 witnessed opening of Country Inn & Suites with about 94 keys, that makes seven per cent of the total inventory available in the micro-market.

Commercial business activity is the mainstay of business for hotels in Navi Mumbai. The city also has a cricket stadium which has become a major attraction. The highly anticipated Exhibition Centre in Vashi, Navi Mumbai (a project undertaken by CIDCO), is expected to open by the end of 2013. The new international airport in Panvel is further expected to strengthen Navi Mumbai’s position as an alternative location to areas under Greater Mumbai.
Tourism development in Thane is mostly undertaken by private investors keen on building resorts along the various lakes in Thane district. Currently, there are no major tourism initiatives in the area.
Navi Mumbai remains a strong growth centre for businesses and corporate houses. The city has a robust pipeline of commercial and residential development for the growing demand in the region and thus remains a prime market for hospitality brands. Over the last three years various branded hotels have opened in Navi Mumbai and new hotels are expected to be added to the existing supply. Ibis, Royal Tulip and Country Inn & Suites are some of the branded hotels which have opened recently. The upcoming supply is expected to increase the current room tally by 1,250 (by 2016), comprising hotels from the organised and unorganised segment. Brands such as Hyatt Regency, Marriott and IHG are expected to enter the Navi Mumbai market in the coming years.
In contrast, the hospitality market in Thane city is still at early stages of development with only 340 rooms expected to be added to the existing supply by 2015. Residential projects have achieved strong success in the Thane market, however commercial and IT development is still limited resulting in a limited activity in hotel development. Leisure Inn, a brand of the Staywell Group is expected to launch its 122 room property by end 2013, While Formule1, an Accor brand, is expected to open its doors by 2015.

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