French hotel company Accor has revised the completion time of its Sofitel hotel in Mumbai twice in the last three years. The hotel was to be opened in 2009, but it was later postponed to the third quarter of 2010. 

The hotel company has finally decided on a date, later this December, to open the hotel, albeit through a soft launch. The three-year delay has doubled the project cost for the hotel with all the inputs that go into building a hotel becoming expensive, says an industry source. 

Construction cost has gone up close to 50% on the back of rising cement, steel as well as labour, while debt for hotel projects, which was earlier available at 10-10.5%, is now available at 15% and more. The story of Leela Group's Chennai hotel too is similar. 

The project is delayed by over two years and is now expected to open in early 2012. The Shangri-La hotel in Mumbai, being built by Phoenix Mills, has been delayed because the company is awaiting approvals. 

In Bangalore, the Ritz Carlton being developed by Nitesh Estates has seen a delay because the company decided to increase the size of the property when it got additional approvals. Its project cost too is up 20%. 

"Hotel projects across the country are facing delays and cost overruns, making it difficult for developers as the time taken to breakeven the property gets extended," says Siddharth Thaker, managing partner of hotel consultancy Prognosis Global Consulting. 

Hotels, unlike residential real estate projects, are not self-liquidating. Here developers have to take debt and put in the money upfront. Hotel projects usually have a long gestation period of at least 6-8 years and as a thumb rule, every 10-15% increase in project cost extends the breakeven time by a year. 

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