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As suggested by Countryboat.com earlier, Bangalore Service Apartments business is heading for tough times.

Many indicators suggest that Hospitality business in Bangalore, including Service Apartments and Hotels are facing slowdown. For example, a recent survey points out the possibility of drop in job recruitment in Hospitality industry in Bangalore. This means Hospitality Industry- which includes Hotels, Service Apartments, Travel and Tourism industry in Bangalore -- faces slowdown.

Indian Hotels, Hospitality industry, Tourism Industry are likely to recruit less employees in the aftermath of Global recession, says Manpower Employment Outlook Survey (MEOS) [1]. This is happening in the context of global travel business slow down. The industry insiders predict that there will be 5 per cent fewer holidays traveling.[2] Travel companies say that they expect the number and length of holidays will come down as a result of global recession. Many travel companies will go under.

According to MEOS survey, in the coming months, employers in both the Services sector and Finance, Insurance & Real Estate sector are less optimistic than they were in Quarter 3. Many employers of Indian Travel and Hospitality companies are likely to cut down costs. Even if they want to recruit new employees, temporary recruitment may overtake permanent in the short-term, so that the managements will have the flexibility to hire and fire.Compared to Hotels, Bangalore Service Apartments do not employ large number of employees. But the overall crisis in the hospitality industry may cause many Service Apartments closing down and as a result of that large number of Service Apartments Employees losing their jobs.

Airline industry is facing crisis world over. Willie Walsh, the British Airways chief executive, is predicting that up to 30 airlines worldwide will go bust. [3]

Encouraged by the support given by India Aviation minister Praful Patel, who publicly said that there would be no intervention from his ministry in case of sackings by airlines, more Airlines in India would sack employees in the coming days.[4] Leading private carrier Jet Airways has already sacked 1900 employees.[*] Kingfisher Airlines has laid-off nearly 300 jobs and may announce more cuts across the board in the coming days.[5]. Due to good equations and business partnership between key players in Government and Indian Private Airline Industry, many believe private Airline Companies may succeed in getting Govt help. However this bail out package may not be able to reverse drop in premium air traveler numbers in India or troubles of Indian Airlines companies. This is another major concern for Hospitality, Hotel and Service Apartments in Bangalore.

Though MEOS survey suggests that IT sector may not witness much reduction in recruitment, media reports indicate this is only in anticipation of recruitments to Special Economic Zones. Though Bangalore has its own IT SEZs, in the wake of global melt down, it is to be seen how positive will be the response of global investors in the near future. Media had earlier reported that prominent colleges in Bangalore admitted to a marked drop in recruitment numbers.[6] According to these reports, there is a 25 % drop in recruitments in almost all top companies.

These are all indications that it is going to be tough time for the Hospitality industry in Bangalore including Hotels, Serviced Apartments and Travel and Tourism companies.
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* It is to be Noted here that late on 16th Oct. Thursday night, in a dramatic U-turn, Jet Airways reinstated all sacked employees and India Aviation minister was quick to claim the credit of it. Thus at least till the Elections are over, there may not be large scale sacking of employees, but the Airline managements may try alternative remedies like slashing the salary.[7] (Note added on 19th Oct. 2008)

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References:
1 ,  2 ,   3 ,   4 ,   5 ,   6 ,   7

A section of residents of a Bangalore Apartments complex protested against foreign nationals from Middle East countries staying in the Service Apartments there. The residents claimed that around 300 of the total 970 apartments in the complex are used as Bangalore serviced apartments. They pointed out that Commercial activity in a residential complex is illegal, and argued that, the Middle-East citizens residing in the Apartments complex is a security concern, in the backdrop of the recent bomb blasts in Bangalore. [1]

Long-term residents are generally not aware of who comes or goes in a Bangalore service apartment, as by the very nature they have a floating population. The security guards have practical difficulty to monitor the movement of Service apartments residents and those who accompany these guests.

There is no list of serviced apartments put up in a public place within an apartment complex. If other residents have complaint about any of service apartments' occupant's behaviour, no one knows whom to complain and the actual owner of the apartments are either not available or not ready to listen to such complaints.

While complaint of a section of long term residents was against middle-east nationalists staying in service apartments, a few others are not against serviced apartments per se but against the lack of regulation. They press for registration of time of arrival and departure of short-term guests , verification of background of the person etc. There is a need for zoning bangalore serviced apartments from other residential apartments. There is a feeling that as the service apartments owners make huge profit by accommodating short term customers, they are not very keen to listen to the complaints from other residents of the same apartment complex.[2]

Later police have asked service apartments operators to maintain thorough checks and a registry of visitors. Police also asked the serviced apartment operators to informally produce required documents like payment of luxury tax to check their legality although it does not comes under their purview.[3]

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References:
[1], [2], [3]

Bangalore Serviced Apartments
As Star Hotels in Bangalore are unreasonably expensive, service apartment in Bangalore are preferred by more and more visitors for their extended stay accommodation requirements. Many corporate also prefer to accommodate their visiting executives in Service Apartments in Bangalore as it help to cut down unnecessary costs. Service Apartments are at least 10% cheaper than Bangalore Hotels. [1]

The Emergence of Industry- Service Apartments, Bangalore.
Though it is true that there were a few Service Apartements in Bangalore earlier itself, people were not very familiar with the concept of "Service Apartment- Bangalore" till the around 2004-2005. The Year 2005 saw approx. 6.8 million square ft of commercial office space absorption in Bangalore and approx. 5.5-6 million square feet during 2006, a number that featured amongst the highest of its kind in the world. [2] At that point of time, the city had shortage for quality hotel rooms. The search for alternative accommodation facilities resulted in large number of Bangalore service apartments opened up. [3]. Service Apartments in Bangalore are, in a way result of the recession prior to 2005. Large number of apartments, which came up during the period of property- boom, found less demand during the recession phase and, as many of them are already fully furnished apartments, some property builders came up with the concept of Service Apartments. Thus, unlike in the west, were it was Hotel industry which came up with this concept, converting some of their suites into serviced apartments, to make the package attractive for their long staying guests, in India, it's either builders or apartment owners that are venturing into the Serviced Apartment business." [4]
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References:
1 , 2 , 3 , 4

Bangalore Slowdown Hits Hospitality Industry- CountryBoat.com Prognostication Vindicated
As pointed out by CountryBoat.com many months before, Bangalore's Hospitality industry has started showing clear indication of slowdown. Businessline has reported recently: "If Indications are to be believed, hotels in the city have been witnessing a softening of rates in the past few months. The average room rates (ARR) have come down by at least five per cent." Read more what Hindu Business line says in its Front Page report with screaming headline: " IT Slowdown Bites- Bangalore Hotel Room Rates Softening." [1] What is true about Hotels is true about Service Apartments also. There is a misconception that the slowdown in the business would in fact help Service Apartment Industry. The assumption is that when the other industries face slow down they will be forced to look for Service Apartments to accommodate their executives and guests. This assessment is not right. Infact, many Hotels in Bangalore already have commited monthly/ extended-stay rates for Corporates. There is a slowdown in the Real Estate segment also. As per one estimate, there are around one lakh Apartments/Houses empty in Bangalore by April 2008. We have pointed out this possibility also. Availability of large number of Apartments would affect Service Apartments' demand. But major factor is the decision by IT industry to shift from off-shore Software development to On-Shore model- into the a job market which is closer to its target export market. Already TATA consultancy and other IT majors have taken up major expansion plans in the Dollar market. The consistent denial of IT business spokepersons that there wont be any slowdown in IT industry should be taken with a pinch of salt.

The Economic Times also points out that the Service Apartments tariffs are expected to fall by 15% - 20% in 4 to 5 years time. It is estimated that in Bangalore 4000-5000 rooms will be added in the coming 4- 5 years. When the supply- demand mismatch gets corrected, unbranded service apartments will become less popular. Economic Times also points out the fact that the Hotels are now having attractive options for extended stay customers.[2]
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References:
[1] , [2 ],