Hospitality: Gaining ground in Ahmedabad

The hotel market in Ahmedabad has seen resurgence in its performance since the Vibrant Gujarat Summit in January 2015. As per our estimates, the market has witnessed a 16 percent rise in YTD May 2015 over 2014 increase in performance despite more than 200 rooms having entered the market recently. Domestic and foreign passenger arrivals have also witnessed a significant increase. The city holds immense potential as a medical tourist destination and is well placed becoming a major commercial city in the country.

 

Gujarat is perceived to be a land of opportunities, driven by the industry friendly policies instituted by the state. The state economy grew by 9 percent in 2013–14, much above the national average of 5 percent. Trade, hotels and restaurants, along with transport, storage and communication, comprise 30 percent of the state’s gross domestic product (GDP). Another major growth driver has been Vibrant Gujarat Summit (VGS). The 2015 edition was attended by more than 25,000 delegates from 110 different countries, drawing comparisons with the World Economic Forum (WEF) Davos as “Davos of the East”.

 

With Ahmedabad being the commercial capital of the state, the focus of all growth in the state emanates from the city. This report gives an overview on the hotel market in Ahmedabad along with its key growth drivers, supply dynamics and hotel performance.

 

Ahmedabad enjoys excellent air, rail and road connectivity with the major metro cities in India. The international airport offers reasonable international connectivity.

 

Increase in international travellers is outstripping the increase in domestic travellers to Ahmedabad. The domestic to international passenger ratio changed to 78:22 in FY2014–15 from 76:24 in the earlier fiscal year.

 

Ahmedabad is the largest city in Gujarat, the largest inland industrial centre in India, and the second largest industrial centre in western India.

 

Government initiatives to promote projects such as the VGS, Sabarmati Riverfront, Gujarat International Finance Tec-City (GIFT City) and Mahatma Mandir Conference Centre are fuelling demand for hotel room nights in
various sectors.

 

Presence of prominent educational institutes such as the Indian Institute of Management (IIM), National Institute of Design (NID), National Institute of Fashion Technology (NIFT), Center for Environmental Planning and
Technology (CEPT) and Mudra Institute of Communications (MICA) adds greatly to the overall buzz in the city and provides access to skilled manpower.

 

Ahmedabad is an emerging metropolitan city. In 2014, the ADR increased marginally by 1.6 percent y-o-y to INR
4,350, and the AOR Average Occupancy Rate (AOR) increased to 57 percent from 56 percent in 2013. The ADR
and AOR both showed marginal increase despite an 8 percent increase in inventory. This was mainly because of significant increase in foreign passengers (22 percent) to Ahmedabad along with continued increase of 11 percent in domestic passengers. The current upward movement is also because of increased destination visibility and investment interest fostered by political changes at the centre.

 

Conclusion
The hotel market in Ahmedabad has seen resurgence in its performance since the Vibrant Gujarat Summit in January 2015. As per our estimates, the market has witnessed a 16 percent rise in YTD May 2015 over 2014 increase in performance despite more than 200 rooms having entered the market recently. Domestic and foreign passenger arrivals have also witnessed a significant increase. The city holds immense potential as a medical tourist destination and is well placed becoming a major commercial city in the country.