Dhaka’s average hotel occupancy has made it the region’s fastest growing hospitality market, says a new study.
By virtue of limited inventory and very high demand, the Dhaka hospitality market outperforms many of its competitive peer cities in the South Asian region with an average market-wide occupancy of 69% and an annual rate of return of US$153, according to a report titled In Focus: Bangladesh, the Dark Horse.
The report was recently published by the US-based HVS that specialises in providing services to the hospitality industry.
HVS research reveals that there is an immense potential and opportunity for developing quality branded hospitality product offerings in this bustling and thriving country.
Additionally, the Gross Operating Profit (GOP) margins in the city are comparatively higher (as weighted against the emerging commercial destinations).
The upscale hotels in Dhaka have a GOP of 50%-55% compared to that of 30%-35% for similar hotels in other commercial cities. “Low cost of manpower has a significant role to play in this outcome.”
Dhaka hotel market has witnessed consistent growth of 7.13% in annual rate of return over the last decade.
During the period, the compounded annual growth rate of accommodated demand was 7% whereas supply grew by 6.3%.
“With demand outpacing supply, the unbranded hotel market in Dhaka operates on comparable average rates as branded mid-market hotels in the city,” said the report.
In terms of occupancy, the organised hotel market was at its peak during 2010–2012 as no new supply was added to the city’s inventory from 2008 to 2012.
The current supply of rooms in Dhaka is primarily in the upscale or upper mid-market segments, which includes hotels such as Radisson Blu, Westin, Pan Pacific, Four Points by Sheraton, and the recently opened Le Meridien.
Moving forward, a supply of 2,600 rooms have been planned over the next five years. However, the progress of most of these proposed developments is either slow or stagnant as these projects face complexities in land acquisition (exorbitant prices and disputed ownership), regulatory clearance and high cost of borrowing.
For a country of 168 million people and an economy with a GDP of US$ 173.8bn, it only has 3,500 hotel rooms in the organised sector.
The buoyant RMG industry has been one of the driving engines for the country over the last decade recording the highest growth among major industries.
This has led to an increase in the overall travel visitation, creating demand for quality hotels in the commercial destinations such as Dhaka and Chittagong.
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 or postpone their travel or stay in unbranded hotels or unorganised sector, which are able to charge a premium due to the supply and demand imbalance.
