2021 Hotel Development Cost Survey | India

2021 HOTEL DEVELOPMENT COST SURVEY INDiA

Megha Tuli

Partner & Co-Founder, Hotelivate

Shailee Sharma

Senior Associate, Strategic Advisory, Hotelivate

Understanding the Report Hotelivate is pleased to share the analysis and insights of the 2021 Hotel Development Cost Survey | India. This survey presents the results of an extensive review of actual development costs of nearly 400 hotels, across positioning and locations, that opened in the country between 2002 and 2020, in addition to offering an in-depth understanding of trends and the factors impacting them.

The survey sample set profile of 378 hotels, having 55,488 rooms across 102 Indian cities, has been illustrated below. Totally, this represents ~40% of the nation’s branded/organised hotel inventory spanning 38 hotel companies with numerous sub brands. In the report, where the sample set profile has influenced the survey results in ways contrary to the trends witnessed on ground, we have provided the necessary indications. This section further offers qualifying conditions and the methodology deployed whilst analysing the data.

SURVEY SAMPLE SET PROFILE Figure 2: Hotel Brands Represented in the Survey Figure 1: Sample Set of the Survey Hotels by Positioning Positioning

23 (6.08%)

38 (10.05%)

57 (15.08%)

378

29 (7.67%)

Economy/Budget

Room Inventory Range

Mid-Market 65 (17.2%)

100 (26.46%)

95 (25.13%)

Hotels Represented

Hotels by Inventory Range

Upper Mid-Market

145 (38.36%)

Upscale

Less than 100

204 (53.97%)

100 - 299 300 or more

Upper Upscale

Inventory Represented

Luxury

55,488

Accor

Independent

Royal Orchid Hotels

Berggruen Hotels

Indian Hotels Company Limited

Best Western Hotels

ITC/Fortune Hotels

Choice Hotels

Jaypee Hotels & Resorts

Sarovar Hotels & Resorts Shangri-La Hotels & Resorts Spree Hotels

Citrus Hotels

Lemon Tree Hotels

Svenska Design Hotels

Concept Hospitality

Lords Hotels & Resorts

The Leela Palaces Hotels & Resorts

Dusit Hotels & Resorts Four Seasons Hotels and Resorts Golden Tulip Hotels

Marriott International Mayfair Hotels & Resorts Oakwood

The Park Hotels The Zuri Hotels & Resorts Triumph Realty Whitbread PLC Wyndham Hotels & Resorts

Hard Rock Hotels

Oberoi Hotels & Resorts

Hilton Hotels & Resorts

Peppermint Hotels

Hyatt Hotels & Resorts

Planet Hollywood International Rosakue Hospitality

IHG

Hotels by Location Type

Hotels by Tier Type

Hotels by Opening Year

Brands Represented

51 (13.49%)

80 (21.16%)

76 (20.11%)

Location Type Urban

Tier Type 150 (39.68%)

Leisure 298 (78.84%)

152 (40.21%)

Tier 1

Opening Year 136 (35.98%)

191 (50.53%)

38

Mid-Market and Upper Mid-Market hotels have the highest representation in the sample set, together accounting for 52% of the total; this supports the trend that the development of lower positioned hotels has gained traction in the last decade.

2009 & prior

Tier 2

2010-2015

Tier 3

2016-2020

Cities Represented

102

Additionally, most of the hotels are based in urban locations (primarily in Tier 1 and Tier 2 cities) and have 100–299 rooms, with the mean inventory of the sample set being 147 rooms. Also, 85% of the hotels opened in 2010 or later years, allowing for the identification and analysis of more recent trends.

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QUALIFYING CONDITIONS The development cost of each hotel and related information has been self-reported by the respondents. While careful attention has been paid to address anomalies and filter out incomplete or questionable data, we have not independently verified the accuracy of each data point.

The survey results do not consider effects of inflation, change in prices of essential commodities, and currency exchange rates, and instead reflect the development cost provided by the respondents as of the opening year of the hotel. Moreover, hotel development costs are impacted by a variety of factors that are unique to each project and hence, the survey results must not be viewed in isolation. They are only meant to serve as a guideline to aid comparison across positioning and other parameters used in this survey.

Not all hotels in the sample set have provided complete information on the breakdown of the development cost or other related information that has been analysed in this report. In such cases, we have carved out subsets of the sample to perform the analysis, eliminating responses with insufficient information.

All information has been collected and analysed by the staff of Hotelivate. Data confidentiality has been strictly maintained throughout this report, with survey results being presented only in the aggregate; no individual hotel, brand or operator has been identified. Hotelivate reserves the right to amend all or part of the report without prior notice. No information contained in this report may be reproduced or distributed in any form without the due acknowledgment and prior written consent of Hotelivate.

PRESENTATION OF SURVEY RESULTS In this report, the survey results have been presented under the following four major sections: Section A: Development Cost per Key Section B: Development Cost per Key Breakdown by Major Cost Categories Section C: Average Development Cost per Square Foot of Average Total BUA Section D: Construction Tenure

Market Positioning

Economy/Budget | Mid-Market | Upper Mid-Market | Upscale | Upper Upscale | Luxury

Room Inventory

Less than 100 | 100-299 | 300 and above

Location

Urban | Leisure

City Tier Type

Tier 1 | Tier 2 | Tier 3

Opening Year

2009 and prior | 2010-2015 | 2016-2020

PARAMETERS

INDEPENDENT VARIABLES

Under each section, we have performed detailed analyses using five primary independent variables, as highlighted below.

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Hotel Development Through the Ages In the mid-90s, when the market size of branded/traditional chain-affiliated hotel rooms in India was assessed for the first time, there were around 18,200 rooms operating across budget to luxury positioning. Per our latest estimates, this figure stands at over 1,46,000 rooms as of 2020-21. Such an impressive growth has been possible owing to numerous factors, including the advent of international hotel chains in India; rising popularity of the asset-light model for expansion (franchise and management contracts); increasing tourism demand (both domestic and international) that has resulted in the need for quality accommodation across positioning; improving macroeconomic conditions that have supported the growth of businesses in the country, further enhancing commercial travel; and a gradual shift in hotel development from upscale-luxury hotels to budget mid-market hotels that are quicker and relatively less expensive to build.

Figure 3: Growth in the Branded/Traditional Chain-Affiliated Room Inventory in India | 1995-96 to 2020-21

Figure 4: Branded/Traditional Chain-Affiliated Room Inventory in India by Positioning | 2000 vs 2010 vs 2020

1,46,352

CAGR: 9%

1,08,682 CAGR: 13%

CAGR: 6%

2000

2010

2020

Luxury

6,269

6,444

14,480

Upper Upscale/Upscale

8,620

19,031

44,676

Upper Mid-Market/Mid-Market

8,019

24,550

65,992

5,406

21,204

33,500 18,160

1995-96

2005-06

2015-16

2020-21

Economy/Budget

120

Branded Rooms Note: Branded/Traditional hotel chains refer to companies with hotels that are predominantly organic-branded.

Source: Indian Hospitality - The Stats & Pulse (S&P) Report FY2021

Around two decades ago, the Indian branded hospitality landscape was referred to as an inverse pyramid, with a larger chunk of rooms operating in the upscale-luxury category; however, this has transformed dramatically since then, with almost 60% of the current room inventory positioned in the economy/budget-upper mid-market space (Figure 4, above).

As the supply of rooms rises, heightening the competition across positioning, determining the viability of hotel projects becomes even more necessary. To that end, a critical component to assess is the hotel development cost. How much does it cost to build a hotel? How long does it take? Is it different across locations? Has it increased or decreased over the years? Endeavoring to address these questions and many others, we are pleased to share the results of the 2021 Hotel Development Cost Survey | India.

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Key Insights

Section A: Development Cost per Key The sample set of 378 hotels (across all positioning) has a total development cost of `57,372 crore, with the average development cost per key computing to `1.03 crore. The survey results have been presented below by the primary independent variables listed earlier in the report.

Figure 5: DCost/Key (IL) by Positioning

Figure 6: Avg. DCost/Key (IL) by Inventory and Positioning Costs just 13% more per key

Economy/Budget

3,661,392

1,25,87,056 1,11,62,647

64,68,391

Mid-Market

Costs 19% less per key

71,95,837

Upper Mid-Market

55,73,267 44,90,899

1,16,11,808

Upscale

1,62,28,769 1,94,53,560

Luxury

DCost/Key (IL)

Less than 100 100 - 299 300 or more

150 rooms or less

Tier 1

Inventory Range *All numbers are in Indian Rupees **DCost/Key (IL) = Development Cost per Key (Including Land Cost)

Tier 2 Tier Type

Tier 3

Upper Mid-Market & Higher

151 rooms and above

2009 & prior 2010-2015 Opening Year

2016-2020

Leisure

1,02,98,647

10,078,238

Figure 9: DCost/Key (IL) by Opening Year Figure 10: DCost/Key (IL) by Location Type

7,789,343

9,687,770

9,541,318

Figure 8: DCost/Key (IL) by Tier Type

11,034,654

1,37,89,389

1,00,25,328

74,58,923

DCost/Key (IL)

Figure 7: DCost/Key (IL) by Inventory Range

Mid-Market & Lower

1,05,96,016

Upper Upscale

1,23,33,229

Positioning

Median of Sample Set: 94,03,822

Urban

Location Type

Validating the general understanding that development cost increases with the rise in hotel market positioning, our findings suggest that an economy/budget hotel in India costs ₹36.61 lakh/key to build while a luxury hotel costs a little over five times at ₹194.54 lakh/key.

The range of development cost within the same positioning is vast, indicating a lack of standardisation. This can be attributed to two main factors – (i) some international brands tend to position their product a notch higher to gain acceptance from the Indian market, and (ii) personal aspirations of Indian owners to develop landmark projects as against efficient ones.

On analysing development cost by inventory and positioning (Figure 6) to determine whether economies of scale can be achieved beyond a certain number of rooms, we found that mid-market and lower positioned hotels, which are predominantly rooms-oriented, can optimise up to ₹11 lakh/key (or 19%) if they have 150 rooms or higher. Though this is not the case with higher positioned hotels, possibly due to the presence of more built-up public areas, such as F&B outlets, meeting facilities and other operating departments such as spas and fitness centres, it is interesting to note that the incremental cost per key is moderate (13%), to build an upper mid-market or higher positioned hotel with an average inventory of 252 rooms vis-à-vis another with 98 rooms.

Hence, the viability of developing higher inventory must be evaluated in the context of market conditions.

Hotels in Tier 1 cities have a higher cost per key in comparison to Tier 2 and Tier 3 cities in India. We also observe that while the land cost is substantially lower in Tier 3 cities than in Tier 1 (and to a lesser extent Tier 2), the costs related to construction, MEP and FF&E aren’t vastly different (detailed later in the report). It must be noted, however, that the average room inventory of hotels in Tier 1 cities is 193 rooms, while that in Tier 2 and Tier 3 cities is 126 room and 98 rooms, respectively.

Leisure hotels in India seemingly cost slightly more to build than urban hotels although the average room inventory of leisure hotels in the sample set is 95 rooms, while that of urban hotels is 161. While this impacts the development cost per key one must also note that many emerging leisure destinations in the country are limited by the availability of resources to efficiently build a hotel, increasing the overall development costs as a result.

Hotel development costs have increased over the years, with the cost per key rising by 28% between the periods 2009 and prior and 2010-2015. Hotels that opened in the last five years cost 58% more to build per key than those that opened in the early 2000s.

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Section B: Cost per Key Breakdown by Major Cost Categories In this section, we have presented the survey results pertaining to the composition of the development cost of hotels by the salient cost categories, further analysed by the primary independent variables. It must be noted that for this specific analysis, we looked at a subset of 104 hotels comprising 13,322 rooms, eliminating entries with insufficient information.

Figure 11: Development Cost Breakdown by Positioning

Total Building Cost

MEP

FF&E

Professional & Legal Fee

Pre-Opening Cost

Interest during Construction

100%

Building Construction Cost

Civil Construction Cost for all above ground area as well as basements

8.23%

7.71% 4.01% 5.67%

5.13% 6.01%

8.58% 4.77% 5.71%

14.52%

15.99%

17.48%

12.61% 5.65% 4.07%

MEP & FF&E

Soft Costs Pre-Opening Costs

Mechanical, Electrical, Plumbing and Furniture, Fixtures & Equipment Professional and Legal Fees, Project Management Fees, Architects, Consultants and Licenses

Linen, Operating Supplies and Working Capital

Breakdown Percentage

80%

6.89% 8.95%

5.93% 20.84%

6.22%

60%

20.58%

17.55% 24.22%

47.51%

47.08%

19.50%

26.89%

19.47%

11.60%

14.88%

40%

20%

IDC

14.28% 20.39%

41.96%

39.24%

31.39%

28.50%

Interest During Construction 0%

Economy/Budget

Mid-Market

Upper Mid-Market

Upscale

Luxury

Upper Upscale

Key Insights

While Professional & Legal costs represent a near similar level of contribution across positioning, in absolute figures, upper upscale/luxury hotels have average soft costs that are 5.5 times more than economy/budget hotels.

Unsurprisingly, land cost as a percentage of total development cost (incl. land) is the highest for economy/budget hotels due to lower cost of construction for such hotels, resulting in lower project cost as a whole, while IDC is the highest in case of upper upscale/luxury hotels possibly due to a longer construction tenure and higher absolute amount of debt.

Positioning

Figure 12: Land Cost % by Positioning

Economy/Budget

Positioning

Building/construction costs make up the highest portion of hotel development costs for most market positioning except upper upscale/luxury hotels, where MEP & FF&E collectively constitutes the largest cost category.

34.71%

Mid-Market

18.98%

Upper Mid-Market

22.04%

Upscale

13.70%

Upper Upscale

13.37%

Luxury

The ratio of various cost categories to the total development cost per key has remained comparable over the years; however, land cost has increased, contributing a higher percentage of the total.

17.17% 0%

10%

20%

30%

Land Cost %

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Total Building Cost

MEP

FF&E

Pre-Opening Cost

Professional & Legal Fee

Interest during Construction

Figure 14: Land Cost % by Inventory Range

Figure 13: DCost Breakdown By Inventory Range

Figure 15: DCost Breakdown by Location Type 100%

100%

11.78%

Breakdown %

6.53% 21.12% 18.59%

5.61%

60% 18.98% 17.80% 19.33%

40%

16.61%

Less than 100

80%

17.72%

100 - 299

5.12% 5.71%

23.91%

17.88%

14.55%

19.45%

17.79%

Leisure

60%

40%

300 or more

16.93%

5.35%

Location Type

5.40% 5.84%

15.32%

7.24%

21.95%

Breakdown %

4.62% 5.01%

12.84%

Inventory Range

9.05%

80%

Figure 16: Land Cost % by Location Type

16.05%

Urban

13.34% 42.40%

20%

38.00% 30.00%

0%

10%

Less than 100

100-299

300 or more

Figure 17: DCost Breakdown by Tier Type

0%

Inventory Range

Figure 18: Land Cost % by Tier Type

9.31% 7.37% 22.78%

60%

Tier 3

5.67%

16.33% 19.66%

14.81%

18.49%

Tier 2

16.02%

Location Type

Figure 20: Land Cost % by Opening Year

6.21%

12.96% 5.21% 5.64%

5.63% 20.64% 16.35%

60% 18.28%

18.52%

40%

40%

Tier 1 34.57%

80%

19.13%

20.82%

Tier Type

5.18%

17.57%

4.11% 3.94%

Breakdown %

18.66%

Breakdown %

Urban

20%

10%

100% 10.67%

13.35%

20%

Leisure

Figure 19: DCost Breakdown by Opening Year

100%

80%

36.52%

20% 0%

0%

37.18%

Opening Year

20%

17.69%

2016-2020

2010-2015

13.96%

15.85% 20%

30.80% 33.47%

0%

10%

35.97%

37.03%

20%

0%

10%

20%

0%

0%

Tier 1

Tier 2

2010-2015

Tier 3

Tier Type

2016-2020

Opening Year

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Section C: Development Cost per Square Foot of Average Total Built-up Area This section looks at the Total Built-up Area (BUA) of the surveyed hotels, and the Average Total Development Cost per Square Foot of the Average Total BUA by the primary independent variables. For this analysis, we considered a subset of 143 hotels comprising 18,261 rooms, eliminating entries with insufficient information. Moreover, for the calculation of Gross Floor Area (GFA), only the BUA “above” ground has been considered.

Figure 21: BUA (Sq Ft) & GFA/Key by Positioning

Key Insights We observe that the BUA below ground (typically basements) tends to average 27% of the Total BUA, with luxury hotels representing the higher end of the range, possibly owing to a larger support team as well as higher requirement of back of the house areas.

The larger incremental spaces in Tier 3 cities are not as expensive to build/furnish as rooms. Thus, with an average room inventory of 98 keys, similar positioned hotels in Tier 3 cities have a lower development cost when compared to Tier 1 cities (where the mean room inventory is 190 keys).

In this subset, economy to mid-market hotels constitute 31% of all hotels that opened between 2010 and 2015 and 50% of all hotels that opened between 2016 and 2020. Consequently, the GFA/ft2 is lower for hotels that opened in the last five years. This is reflected in the average development cost per key as well.

1,323

1,311

812 774

Although the development cost per key rises with the increase in positioning, the development cost/ft2 of total BUA is nearly similar across for hotels across the budget/economy to upscale positioning, rising steeply only for upper upscale/luxury positioned hotels, driven mainly by high FF&E costs, soft costs, and MEP costs, as mentioned in the previous section.

An important aspect to bear in mind here is that economy to mid-market hotels are represented almost equally (40% of the total) in both Tier 1 and Tier 3 cities in this subset; however, the product profile is quite different. In Tier 3 cities, such hotels have fewer rooms and more public areas (F&B outlets and event venues), whereas in Tier 1 cities they are akin to room factories.

1,478

Average of Total BUA AG (Sq Ft) Average of Total BUA UG (Sq Ft) GFA/Key

540

Economy/Budget

Mid-Market

Upper Mid-Market

Upscale

Luxury

Upper Upscale

Figure 22: DCost/Key (IL) & DCost/SqFt (IL) by Positioning

2,36,06,109

Average of Total BUA UG (Sq Ft)

2,21,17,389

GFA/Key

13,221 10,849 1,45,42,414

77,37,156

85,00,146

51,87,472 7,816

7,537

7,386

6,954 Economy/Budget

Mid-Market Upper Mid-Market

Upscale

Upper Upscale

Luxury

Positioning

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Figure 23: Avg. BUA (Sq Ft) & GFA/Key by Inventory Range

Figure 24: DCost/Key (IL) and DCost/SqFt (IL) by Inventory Range Dcost/Sq Ft (IL)

Average of Total BUA AG (Sq Ft) Average of Total BUA UG (Sq Ft)

Figure 25: Average of Total BUA AG (Sq Ft) and GFA/Key by Location Type

Dcost/Sq Ft (IL)

Average of Total BUA AG (Sq Ft) Average of Total BUA UG (Sq Ft)

Dcost/Key (IL)

GFA/Key

Figure 26: DCost/Key (IL) and DCost/SqFt (IL) by Location Type

Dcost/Key (IL)

GFA/Key

1,91,79,235

8,905

1,42,879 1,025

11,419

1,032

1,28,09,943

93,114 95,60,252

2,30,744

65,686

77,99,420

1,59,418

8,705 35,556

60,564

888 26,473

Less than 100

7,329

67,874

6,113 100 - 299

300 or more

Less than 100

944 100 - 299

300 or more

Leisure

Urban

Leisure

Inventory Range

Figure 27: Average of Total BUA AG (Sq Ft), Average of Total BUA UG (Sq Ft) and GFA/Key by Tier Type

Urban

Location Type

Figure 28: DCost/Key (IL) and DCost/SqFt (IL) by Tier Type

Dcost/Sq Ft (IL)

Average of Total BUA AG (Sq Ft) Average of Total BUA UG (Sq Ft)

1,33,25,584

1,091 4,30,181

Figure 29: Average of Total BUA AG (Sq Ft), Average of Total BUA UG (Sq Ft) and GFA/Key by Opening Year

Dcost/Sq Ft (IL)

Average of Total BUA AG (Sq Ft) Average of Total BUA UG (Sq Ft)

Dcost/Key (IL)

GFA/Key

Figure 30: DCost/Key (IL) and DCost/SqFt (IL) by Opening Year

Dcost/Key (IL)

GFA/Key

1,51,32,933

80,750 46,346

7,414

1,20,56,575

8,670

1,03,928

95,632

96,057

97,27,582

1,35,64,139

1,003

1,030 1,07,52,084

1,16,755

9,534

8,673

1,69,734

1,082 2,05,625

45,924

28,923

8,420

998

826 Tier 1

Tier 2

Tier 3

Tier 1

Tier Type

Tier 2

Tier 3

2012

2016

2012

2016

Opening Year

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Section D: Construction Tenure We also analysed the construction tenure of the surveyed hotels to analyse its impact on development cost. For this analysis, we reviewed a subset of 352 hotels comprising 52,442 rooms, eliminating entries with insufficient information.

Average

Minimum

Figure 31: Construction Tenure by Positioning

Maximum

Figure 32: Construction Tenure by Inventory

The average construction tenure of all hotels in the subset is 42 months.

144 144

117 108 117 84

72 54

44

38

30 18

21

11

Economy/Budget

Mid-Market

Upper Mid-Market

72 51

48 30

51

Upscale

Luxury

Upper Upscale

Less than 100

100 - 299

300 or more

Nonetheless, maximum tenures ranging from 54 months to 144 months point to the fact that the actual time taken to acquire the funding and statutory licenses, permissions and approvals to open hotels in India delays projects.

Inventory Range

Positioning

Figure 33: Construction Tenure by Tier Type

However, when one looks at the maximum tenures, there are hotels that took 8 to 12 years to build as well, many of which were in politically unstable regions, holding back commercial and infrastructural development.

34

18

11

Figure 34: Construction Tenure by Location Type

144

Figure 35: Construction Tenure by Opening Year

144

117

144

117

72 42

43

42

40

48

43

35

20

18

Tier 1

11

Tier 2

Tier Type

Tier 3

18

Urban

11 Leisure

Location Type

18

2009 & prior

18

2010-2015

Expectedly, large format hotels take longer to build (53 months on average) than smaller hotels (38 months on average). Additionally, the fact that most of the large format hotels in the subset have a higher positioning, further contributes to this trend.

Hotels in urban and leisure locations suggestively take nearly the same amount of time to build and open. Even when viewed by positioning, upscale-luxury hotels in both leisure and urban locations take, on average, 46-51 months to open.

102

44

When reviewed by positioning, as anticipated, luxury and upper upscale hotels have the longest construction tenure averaging 51 months and economy/budget hotels have the shortest tenure averaging 30 months.

53 43

38

32

30

Key Insights

44 11

2016-2020

Opening Year

Construction tenure of hotel projects in India has increased over time even though lower positioned hotels are being built, project management companies are being hired and more technology is being used. That said, many emerging locations are being tapped in recent years, where initial logistical challenges could have delayed hotel projects to a certain extent.

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Additional Takeaways for Developers Overall, we note that hotels in India, particularly in the economy to mid-market positioning, offer substantially more non-room areas in the form of multiple F&B outlets and meeting facilities than similarly positioned hotels in North America or Europe. While this has always been true for domestic hotel chains, international brands that have an established presence in the country or have recently entered, have also realised the need to offer extended F&B options. While F&B contributes anywhere from 20%-45% of the top line, based on the positioning, it certainly increases the development cost of hotels as well.

Figure 36: Avg. Construction Tenure & Avg. IDC % by IDC % Range Avg. Construction Tenure

Avg. IDC %

58

56 20.76% 44 37

The availability of less expensive manpower in comparison to North America and Europe has allowed international brands to develop full-service instead of select-service hotels, even in the budget and mid-market space in India. This further contributes to an increase in the development costs.

Another critical aspect to consider is the rise in construction input costs in recent years, especially that of cement and steel. However, the implementation of uniform Goods and Services Tax (GST) is being viewed positively by the construction industry, as it has helped standardise taxation rates of raw materials across states. Going forward, an increased use of technology, streamlining of development regulations by the government, and the advent of international contractors and project management companies will likely make hotel construction in India more efficient.

12.07%

6.90%

2.65% <5%

5.1%-10%

10.1%-15%

>15.1%

IDC % Range

While on this analysis, we also reviewed the impact of construction tenure on Interest During Construction (IDC). As Figure 36 shows, when you have a longer construction tenure, IDC costs are understandably higher, irrespective of the market positioning. For example, 53% of the hotels with an IDC between 10.1%-15% of the development cost and 44% of the hotels with an IDC over 15% of the development cost are in the upper mid-market and below segments.

On average, IDC accounts for 15% of the total development cost of hotels in India, which is on the higher side. This is largely attributable to the high lending rates as well as long construction tenures for hotel projects in the country. The industry’s long-standing demand from the government for being accorded the infrastructure status that could possibly address this challenge hasn’t fully been met yet. In 2012, infrastructure status was granted to three-star or higher category hotels outside cities with a population over one million. Then in 2013, the government granted infrastructure status only to hotels with a project cost of more than `200 crore (excluding land).

Significantly, both thresholds covered a very small percentage of hotel projects in the country.

IN CONCLUSION Our report seeks to provide trend lines across a variety of data points and matrices relevant to the development cost of hotels. Having said that, hotels are a unique asset class with the development timeline and cost breakdown for each one being different. This report provides broad indicators to aid developers in controlling individual cost lines without getting entrenched in the specifics of the outcome. To reiterate, there is no ideal cost structure for hotels of any positioning, but an understanding of cost breakdown and range for the development cost per key can result in efficient cost structures and hotel development.

The authors wish to thank Neha Katyal, Sanaya Jijina, Achin Khanna & Deepika Thadani for their contributions to this report.

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