Growth in tech, auto industries pulls global hotel brands to Pune

Pune: After launch of Conrad by Hilton, Marriott Suites & Crowne Plaza, in 2016; Ritz Carlton will make its debut next year.

That Pune has emerged as the fastest growing IT hub and now a start-up centre as well is known; what is not is that the city is also seeing the entry of premium global hospitality brands. In the first six months of 2016, Pune has seen at least four new properties coming up.

Earlier this year, Pune marked the debut of Conrad brand from Hilton Worldwide. Crowne Plaza launched its brand, while Marriott Suites began opened a new hotel here this year. Ritz Carlton is expected to make its debut in the city next year.

According to a study by ICRA, the city currently has a total luxury room inventory of 4,800, a number that is expected to go up by another 1,100 by the end of this fiscal  year.

“The national occupancy rate is around 62-64 per cent, Pune reported occupancy of about 67 per cent in FY2016, following 58% in FY14 and around 61% in FY15.  When the industry tanked in 2009, Pune was among the first cities to feel the impact with RevPARs hitting deep lows. With a pan-India occupancy recovery, Pune is also witnessing a pickup in RevPARs.” said Pavethra Ponniah, VP, ICRA. RevPAR is the hospitality industry’s term for Revenue Per Available Room.

The city is also among the first few to see a revival in average room rates. From a low of Rs 3,900 per night in FY15, ARRs (Average Room Rate) have moved to 4,000-4,100. The demand growth for rooms in the city grew by 10-12% in FY16 from a low of 4% in FY14.

Neeraj Govil, market vice president, South Asia, Marriott International, believes that one of the reasons for the surge in luxury hospitality brands into the city is due to the changing profile of the city and Pune emerging as an alternative destination to Mumbai.

Marriott has four properties and three brands in Pune—JW Marriott, Courtyard Marriot, and the recently launched Marriott Suites. Next year Marriott International’s luxury brand Ritz Carlton will also make its debut.

“What has worked for us is the way we have distributed our properties across the city. For JW Marriott our average occupancy has been 70 per cent (end of July) around the year. We have the highest ratio. When we compare ourselves to the market FTR, then we are able to charge 20 per cent premium over the market,” Govil said.

Recently the city saw the launch of Conrad Hotels & Resorts, the first luxury hotel from Hilton Worldwide, which entered the city with 310 rooms.

Andre A. Gomez, Head of Operations (India), Hilton, said Pune today is not just large metropolitan cities but several markets which were traditionally considered as Tier II that are driving demand for luxury goods. Pune follows only Delhi, Mumbai and Ahmedabad in spending the most on luxury brands, according to a recent report, he added.

“Over the past decade, the hospitality sector in Pune has grown from a negligible base of branded hotel rooms into the fifth largest market in terms of existing supply today. Through the same period the city saw a steady growth in demand and, according to industry reports, this trend is anticipated to continue. While the commercial and long stay segments experienced a sturdy increase, driven to a large part by the IT/ITeS sector, Pune has also established a reputation for being the preferred destination in Western India to host weddings, events and conferences, as it offers a range of options and at great value,” he said.

The Indian hotel industry is getting back on its growth trajectory driven by domestic demand. ICRA maintains its growth outlook for the industry at 8-10% during FY2017, with domestic demand-led occupancy growth, and some increase in rates in key markets of Mumbai and Goa supporting revenues. ICRA anticipates rate increases during FY2017 will only be restricted to select markets with high occupancies; markets like Bangalore (supply of rooms) and Chennai (existing over supply) will likely continue to struggle.