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Global real estate adviser DTZ estimates that there will be a need for approximately 7,000 rooms in the city during the games. With the international tourist forecast for Delhi being 18 lakh in 2010 and of domestic tourists being 35.8 lakh in the same year, Delhi would need around an additional 10,412 star rooms for foreign tourists and about 2,366 star rooms for domestic tourists in the year. To meet this huge demand, the Delhi Development Authority (DDA) has auctioned many hotel sites in the capital during the past few months. It is expected that 22-27 hotels with 300–500 rooms each will significantly contribute to the accommodation facilities for the tourists. The number of hotels might increase if serviced apartments and mixed-used developments are taken into consideration.

Delhi is considered as one of the popular and important tourist destinations in India. About 61% of the total international tourist arrivals in India visit the capital and among them about 22% of them prefer star hotels. The number of five star hotels in Delhi is 24, of four star is 8 and of three star is 11. Occupancy levels in Delhi hotels have witnessed a growth of 11% in 2004-05 and the average room rates have registered a growth of 29%. The significant growth in occupancy and average room rates indicate the rising demand in the hospitality sector.

According to DTZ, The National Capital Region is expected to see an estimated 27 new hotels, serviced apartments and mixed-use developments with approximately 4,900 rooms in various categories over the next three to four years, with nearly 20 new hotels to be in Gurgaon alone. The new supply will start entering the market in 2007-08. This growth will be supported by significantly improved road and transport infrastructure (a six-lane section of National Highway 8 connecting Delhi and Gurgaon will open in late 2006), expansion/modernisation of the Delhi airport and demand induced by the Commonwealth Games.

Hotel majors including the Oberoi Group, Taj Group, and the Leela Group are all gearing up to participate in the upcoming developments. While the Oberoi Group has plans to set up two hotels in Delhi and Gurgaon, the Indian Hotel Company has plans to develop three hotels in Delhi and Gurgaon. Likewise, the Leela Group is developing a 319-room, five-star-hotel in Delhi. Unitech, a Delhi-based real estate developer, is also setting up three new hotels, while international hotel major Marriot is setting up hotels in Delhi, Noida and Gurgaon.

An increase in hotel activity is expected in the mid-market and budget segment, following the auction of hotel sites by the DDA in Jasola and Saket. However, land has been auctioned at exorbitantly high prices in such auctions. For instance, a 2.2 acre land parcel for hotel development was auctioned at an exhorbitant price of Rs 86 crore per acre. Such land prices are unsustainable, even for a five star premium hotel, according to industry experts, especially when the planned supply is likely to come to the market around the same time. Thus, while there is an existing deficit of hotel rooms, which is likely to get accentuated primarily by the Commonwealth Games in the short term, the price, at which land has been picked up in auctions, can make these hotel projects potentially unviable."

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DTZ is one of the world’s leading real estate advisers, providing real estate and business solutions to multi-national companies, major financial institutions, property companies, banks, governments and other public sector organisations. DTZ’s transactional business advises on the purchase, sale, leasing and acquisition of all types of commercial and residential real estate. Professional advisory services include the management of real estate portfolios, building consultancy, and valuation as well as capital advice to maximise the value of real estate as an asset class.