-By Raquib Siddiqi
The hospitality industry in Bangladesh is entering a new era with the addition of more brands to its growing hotel portfolio. With the coming up of a number of new international hotels brands, the sector is now assuming a mature look.
But, according to an expert study, there is need for mid-market budget properties to develop tourism— in both domestic and international segments.
In the absence of any type centralised agency concerning hotel industry, it is tremendously difficult to get true picture of ongoing hospitality projects. However, piecing together information from different sources, we have been able to compile a list of hotels under construction in Dhaka, Chittagong, Sylhet and Cox’s Bazar. These properties are scheduled to start operation between 2016 and 2019.
With the hotels in the following list, starting operation, Dhaka will be able to offer nearly 5000 more upscale brand hotel rooms. There will also be 650 more hotel rooms in Dhaka, outside the management of international hotel chains, expected to go into operation between 2016 and 2018.
Upscale brand properties
(1) 119-room Four Points by Sheraton, Second Phase, Gulshan-2 Circle. (2) 226-room Intercontinental, Ramna. (3) 250-room Hilton, Gulshan-2. (4) Holiday Inn, (room unknown), adjacent to Hatirjheel Lake. (5) Hyatt, Gulshan 2 Circle (room unknown). (6) 250-room Courtyard Marriott, Gulshan Avenue, Gulshan-2. (7) 306-room Sheraton, Purbachal Link Rd. (8) 300-room Hyatt Regency, Bashundhara. (9) 259-room Sheraton, Kemal Ataturk Ave, Banani. (10) 250-room Holiday Inn, adjacent to Shahjalal Airport. (11) 400- room Intercontinental / Crown Plaza, Shahjalal Airport. (12) 700-room JW Marriott, In front of Jamuna Future Park, Pragati Sarani. (13) 375-room Swissotel, adjacent to Hatirjheel Link. (14) 185-room Novotel, Gulshan Avenue in Gulshan-1. (15) 200-room Hotel Maredian, Banani. (16) 117-room Movenpick, Gulshan. (17) 180-room Hyatt Place, Mohakhali . (18) 150-room Army Proposed hotel at Hatirjheel and (19) 200-room Hotel (Aftab Group). The last two are looking for management with international hotel chains.
There is also a number of properties coming up outside management of international hotel chains. These are: (1) 50-room Baridhara Rest House, Baridhara. (2) 220-room BRAC Hotel, Niketon. (3) 60-room Galaxy Hotel, Gulshan. (4) 50-room Hotel Verba, Banani. (5) 40-room Nasen Grardenia 2, Baridhara. (6) 30-room Baiti Banani. (7) 35-room Baiti Baridhara, Baridhara. (8) 35-room Baiti Gulshan. (9) 100-room Eden The Residence, Banani . (10) 30- room Platinum Mirpur. 60-room Lake Shore (Uttara).
Apart from Dhaka, more hotels, both branded and non-branded are also coming up in Chittagong, Sylhet and Cox’s Bazar. Naturally, Cox’s Bazar getting the lion share of the growth.
In Chittagong 200-room Westin and 150-room Best western are in the pipeline. There is also proposed 250-room A K Khan hotel.
Two under construction hotels in Sylhet 200-room Grand Sylhet Hotel and 200-room Hill Site View are expected to start operation by 2017.
200-room Radisson blu and 120-room MovenPick Hotel & Spa Cox’s Bazar is scheduled start operation in 2017. However, opening of 150-room Radisson Resort at Enani is not known.
In addition to these two Radisson properties, the beach town is going to get more hotel rooms. These are (1) 150–room Hotel Bluebanshee Cox’s Bazaar Ltd. (2) 250-room Hotel Gateway International. (3) 300-room Hotel Sand Marino. (4) 120-room Cox Golden Touch. 270-room Hotel Sea Princess. (5) 250-room Hotel Oasis. (6) 220-room Imazine Hotel and (7) 350-room Sea Palace Hotel & Spa.
With start of operation of these properties in couple of years time, Cox’s will be able to offer nearly 2000 rooms, of which 320 rooms are branded.
According to a study by HVS, a New York based hotel consulting and valuation organization Bangladesh now “only has 3,500 hotel rooms in the organised sector. A majority of these are in the upper upscale and upscale segments leaving the mid-market, budget and economy segments open for investment”.
Bangladesh enjoys diverse natural landscapes varying from the rolling hills and tea estates to the beautiful rivers in deltaic plains, Sundarbans – the largest mangrove forest in the world, and Cox’s Bazar – the longest beach on earth. However, in spite of such destinations that hold much scope for tourism, the country doesn’t offer many avenues for quality leisure accommodation, thereby failing to attract both the international and domestic travellers, the HVS study said.
The study observed the rapid economic growth in the country, especially Dhaka, coupled with a relatively small increase in hotel supply has led to a steep and sustained increase in both average rates and marketwise occupancies of the existing hotels. This acute shortfall of quality accommodation has also led to a large quantum of unaccommodated demand. Visitors travelling to Dhaka during peak periods are forced to either cancel/postpone their travel or stay in unbranded hotels/unorganised sector, which are able to charge a premium due to the supply and demand imbalance.
Hotel demand in Dhaka is primarily driven by the commercial, official and airline segments. Furthermore, since 2008, the Meetings, Incentives, Conventions and Events (MICE) segment has emerged as a major contributor to the overall demand in the city owing to the growing demand for conventions and business-to-business (B2B) trade exhibitions. This segment grew from 5 per cent of overall demand in 2008 to 11 percent in 2014.
Dhaka – Hotel Performance
HVS study further observed that Dhaka hotel market has seen consistent growth of 7.13 per cent in ARR over the last decade. During this period, the Compounded Annual Growth Rate (CAGR) of accommodated demand was 7.0 per cent whereas supply grew by 6.3 per cent. With demand outpacing supply, the unbranded hotel market in Dhaka operates on comparable average rates as branded midmarket hotels in the city.
The current supply of rooms in Dhaka is primarily in the upscale or upper mid-market segments, which includes hotels such as Radisson Blu, Westin, Pan Pacific, Four Points by Sheraton, and the recently opened Le Meridien.
Moving forward, HVS study said, a supply of substantial rooms has been planned over the next five years. However, the progress of most of these proposed developments is either slow or stagnant as these projects face complexities in land acquisition (exorbitant prices and disputed ownership), regulatory clearance and high cost of borrowing.
Dhaka – Future Outlook
HVS study said that Dhaka has seen very limited supply, which has not kept pace with demand. On the other hand, there are a number of projects announced or under construction. However, experience in the market has shown that hotel projects take approximately two to three times the average construction duration as compared to other peer cities in South Asia or else they do not get constructed. Therefore, while a lot of supplies have been announced, we expect only a limited portion to enter the market and, hence, its impact shall be only short term.
The proposed supply is primarily in the upper upscale and upscale segments and we see a void in the midscale, budget and economy segments. Moving forward, there is a need to develop hotels in these segments, which will benefit both domestic and foreign travellers who currently utilise the unbranded sector due to lack of choices, the HVS study on Bangladesh observed.
Chittagong is a major commercial hub of Bangladesh. The city attracts many investors from the South Asia and Europe; however, due to limited availability of quality branded accommodation, travellers prefer staying in Dhaka overnight. This trend has impacted the overall attractiveness of the destination.
HVS study observed that similar to Dhaka, most of the hotel demand generated in the city is through the Commercial segment, which accounts for 81 per cent of the accommodated room nights. Apart from the manufacturing and banking sectors, Chittagong generates a large quantum of demand from gas explorations as well.
Chittagong – Hotel Performance
The Chittagong hotel market is primarily driven by demand generated from the EPZs, financial institutions in Agrabad and its port. The city has a high demand potential for room nights that currently remains untapped due to a paucity of quality branded hotels. This lack of quality branded hotels dissuades the high-end consumers to visit the city.
The city recently saw the opening of its first branded hotel, the 241-room Radisson Blu, which started construction in mid-2009 and is owned by the Army’s Sena Hotel Developments Limited.
The Radisson Blu shall help cement Chittagong’s position in Bangladesh as a prominent commercial centre. Other future projects such as Courtyard by Marriott and Novotel shall further help in bridging the demand supply gap.
Chittagong – Future Outlook
As the city witnesses the entry of quality branded hotels, it is also expected to impact the overall fabric of the city itself. Quality accommodation shall help position it correctly as the second-most important city of Bangladesh and this will catapult it into the major league.
HVS study has examined leisure destination of the country and made interesting observations. These are as follows:
Bangladesh is one of the most densely populated countries. Its emerging middle class combined with growing income levels has led to a rise in domestic consumption. With rise in income level, people are increasingly looking for getaways/vacation spots within the country. However, due to the lack of tourist destinations within the country, individuals/families are restricted to travel outside the country. Hence, there is an urgent need to focus on development of leisure destinations within the country.
A number of locations within the country have the potential to be nurtured into leisure destinations, however, due to poor infrastructure planning these destinations have not been developed to their true potential. While a large proportion of the domestic tourists travel to Cox’s Bazar and Sylhet, there remains an absolute scarcity of quality branded hotel accommodation and services in these markets.
Bangladesh’s terrain and lush rainforests allow for great quality developments and it should emulate the best practices (safety, security, entertainment, nature preservation, connectivity and such like) from successful neighbouring countries such as Cambodia, Thailand, and Sri Lanka in order to tap into its leisure potential.
Cox’s Bazar is recognised as the beach resort district of the country with the longest sea-beach in the world. It is the most-visited domestic tourist spot in Bangladesh. Despite the promising potential that the destination holds, this city has not yet been able to enhance its desirability to attract tourists. This is primarily due to problems such as squatter settlement, rampant unplanned development of shops, hotels, motels, time-share condominiums and residences along with other overlapping administrative anomalies. Cox’s Bazar is today a veritable concrete jungle with looming empty hotels that have been sold off as time-share options to uninformed investors.
Cox’s Bazar is a highly seasonal market, which performs at an average year round occupancy of approximately 50 per cent at an average rate of US$ 40. We have been seeing increasing stress on the market as both occupancy and average rates have been declining, while large unbranded supply continues to enter, HVS study said.
Sylhet lies on the banks of Surma river in Northeast Bangladesh. The city is surrounded by tea estates, rolling hills, lush vegetation and a beautiful landscape.
Endowed as it is with such natural beauty, Sylhet has the potential to be developed into a destination on similar lines as tea/coffee estates in other South Asian countries such as Darjeeling, Coonoor, Ooty in India, and Nuwara Eliya in Sri Lanka.
To enable such growth and retain its charm, Sylhet would have to develop sustainably; and future hotel and commercial developments would need to consider the heritage and scenic aesthetics of the region and not construct indiscriminately.
HVS study strongly felt that Bangladesh has an underutilised tourism market, which fails to tap into either the international visitors or the domestic consumers. “Out of a total of 463,000 international tourists visiting Bangladesh, we estimate in excess of 90 per cent to be for commercial purposes. We also see a rising middle class where in nearly one million Bangladeshis travelled abroad (2014). However, they have no quality destinations for vacationing in their own country”, it observed.
The HVS suggested that some new destinations that can be developed offering different experiences are as follows: Sylhet – Tea Estates; St. Martins Island; Cox’s Bazar -Beach Destination; Kuakata-beach destination and Sundarbans – Mangroves.
Concluding the study report, HVS said Bangladesh has made tremendous economic progress over the last decade with GDP expected to continue growing at approximately six percent over the next five years. The hotel industry, in presence of growing demand and unstructured supply, presents numerous opportunities for profitable investments. Commercial destinations such as Dhaka and Chittagong, which have seen the opening/announcement of new hotels in recent years, still lack the structure befitting established commercial destinations.
This presents a large gap and an investment opportunity for hotels to enter different positioning/segments, which are necessary to provide the markets with a healthy competitive environment. With demand outpacing supply and presence of unaccommodated demand present great potential for mid market and budget hotels in Commercial destinations.
While Commercial destinations present opportunities currently, the leisure destinations in the country still need to be developed and present immense potential especially in the light of the increasing traffic inflow, burgeoning middle class and rising domestic consumption.
(A senior journalist Raquib Siddiqi is a former editor of The Bangladesh Times)