Bangalore may face oversupply of hotel rooms

BANGALORE: With demand being uncertain and average room rates under pressure, Bangalore is expected to add the highest numbers of keys in the luxury segment hotels. This would mean an increase of more than 100% in the total room inventory.

“In terms of market performance, Bangalore initially numbered among the best-performing hotels markets in India, thereby attracting a number of developers to enter the hospitality,” said Jain.

The global recession and addition of new supply led to a steep decline in the market-wide RevPAR levels in 2009-10. However, with the stabilization of domestic and global economies, the market bounced back in 2010-11. “We expect Bengaluru to maintain its position as one of the country’s most dynamic and promising hospitality markets in the future, as well,” he added.

Comment: This is proof that there is an infrastructure bubble in India especially in cities like Bangalore and Mumbai. Over production without any real connection to consumer demand in the market. Cheap credit from banks and raised through infra bonds promoted by the Indian govt have led to a distortion of not only the price system but also production.

Indian economy will not collapse overnight but will decline slowly and painfully to a state of  quasi-depression which will include high inflation(double digits well beyond 10%). The malinvestements will have to be wiped out. The greatest debt will come from businesses and the govt which would mean tightening the spending a la austerity.

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