Bandish Mehta, General Manager, Novotel Pune
Accor is on an expansion spree in India. A global company with 4,000 hotels worldwide and 397 hotels in the Asia Pacific, the company began its journey in India in 2006 with the Hyderabad International Convention Centre. Over the years, it has expanded to 24 hotels and plans to reach a total of 50 hotels in the next three years, Novotel being among them. Several reports suggest that an additional 180,000 branded rooms will be added to the existing number of hotels. Highlighting the positive growth trajectory of this sector, Bandish Mehta, General Manager, Novotel Pune, with an experience of 17 years in the hospitality sector, says, "Demand in the hospitality sector will increase by 9-10 per cent in 2014." He further elaborates upon the company's expansion plans and the hospitality scenario in Pune, in conversation with MONISHA RAO.
Give us an assessment of the hospitality sector in Pune.
Pune's hospitality sector has witnessed reasonable growth in the past five to seven years. Mid-scale and economy hotels are the most viable set-ups that can sustain themselves in this competitive market. As Pune is an upcoming location among Tier-II cities, room supply has increased by 69.2 per cent in 2011 over 2010, and by 8.6 per cent in 2012 over 2011. Moreover, the growth of room supply is set to increase by 7.6 per cent from 2013 until 2017. However, the occupancy rate in Pune has declined by 8.5 per cent in 2011 compared to 2010. Nevertheless, the supply-demand scenario changed in 2012 ,which shows a 9.46 per cent increase in occupancy compared to the previous year. Pune's performance in the hospitality sector can be rightly attributed to the 'extended stay segment' and the significant increase in commercial and industrial activities.
What has been Novotel's investment in this sector?
The market has been very challenging; in such a scenario, our main focus has been on the increase in footfalls in our hotels. With the slowdown and decrease of marginal Average Rate of Return (ARRs) in the cities, we have made sure that we are on par with the city's market price and not overambitious. We have 26 per cent equity in Novotel Pune. Its per-key cost of development has been Rs 70 lakh.
Also, budget and economy hotels in Pune are poised for maximum growth as the city does not cater to the luxury segment. The per-key cost of development of a budget hotel is Rs 40 lakh with a payback period of 10 years and is city-dependent; however, the accounting rate of return of every city has dipped and is declining by 5-8 per cent.
Do you have any expansion plans?
There is a huge opportunity in India for branded hotels and that is why Accor plans to open eight more hotels.
We are expanding aggressively in India in the budget, economy and mixed-skill economy sector. We are also expanding into Tier-II and Tier-III cities and are keen on exploring opportunities in Vadodara.
Which cities promise maximum growth in the sector?
Chennai offers maximum growth opportunity with the booming automotive and IT sectors. Kolkata too is slowly emerging as a major business hub. The unavailability of good accommodation and gradual economic growth of these two cities make these attractive growth destinations for the hospitality sector.
What role does branding play in the success of a hotel?
Branding is the life-breath of a hotel and plays an important role in its success. However, some hotels are parting from popular global brands. If the owner or investor of a hotel assures sustainability, it can definitely be managed well. The right marketing on a global network is the key. Global brands provide a benchmark and professionalism to the project. It is easy to run an economy hotel near a railway station or small standalone properties in Tier-II and -III cities; however, on a global market only branded hotels work.
How has the approach of Indian developers changed towards the hospitality sector over the years?
Over the years, a large number of builders have forayed into the hospitality sector with growing expertise and professionalism.
I will suggest that builders leave the management aspect to experts without any hesitation and adopt a symbiotic relationship. Overall, from the construction point of view, Indian developers have come a long way. However, there is a small gap between international and Indian market standards - we need to improve on our eye for detail.
The sector is to witness an investment of $200 billion. Where in the country do you see the maximum activity?
The hospitality sector is growing all across the country. Tier-II and Tier-III cities that lack branded rooms are on a high growth trajectory. Places like Darjeeling and Shillong will provide a good boost to the industry. Accor plans to increase its current hotel portfolio from 24 to 50 hotels in the next three years with Tier-II and Tier-III cities as main areas of focus. In India, we have been in the hospitality sector for seven years and are on track with our expansion plans.
Share your outlook for the hospitality sector.
The sector faces buoyant growth in major cities like Mumbai, Delhi and Bengaluru. With the increase in competition in the sector, the variety of segment-wise availability for individuals has increased tremendously. Hence, I expect 2014 to be a good year with a new government coming into power. With the influx in tourism and infrastructure growth, the sector is set for a positive outlook in the near future. Streamlining licences and setting up processes along with adequate infrastructure facilities are on top of our wishlist for the new government.
At a glance
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