Indian luxury brands and overseas hotel chains are rushing to expand in the budget segment.Demand from domestic business and leisure travellers is soaring, but the rising cost of land may limit growth in this sector.

Already there is a shortage of hotel rooms in India. A booming economy, and a growing legion of business travellers is sending room rates sharply higher.

According to Reuters news agency many luxury hotels in Mumbai, New Delhi and Bangalore are booked till mid-2007.

Rates at Bangalore’s Leela Kempinski and the Hotel Imperial in New Delhi are hitting $280-$290 a night, nearly three times the average room rate in the United States.

An estimated 100 economy hotels are being planned in India over the next three to five years by firms including leader Indian Hotels, as well as Accor , Marriott International , InterContinental Hotels , Starwood Hotels , Hilton Hotels and Shangri-La.
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