Pune budget hotels market – rising to the challenge

By: Mandeep Lamba, Managing Director – Hotels, JLL India

Over the past decade, the Pune hotel sector has emerged a formidable competitor to other the hospitality markets in the country, growing from a negligible base of branded hotel rooms in 2005 into becoming one of India’s top five hotel markets in 2014. Over the course, it has weathered multiple storms ranging from significant supply increases to multiple bouts of economic uncertainty, both globally and regionally.

Without a doubt, these storms have negatively impacted the overall trading metrics of average rate and occupancy. However, a far more positive fact not visible prima facie is the double-digit percentage increase in the night demand for hotel room over the past five years. This was largely been driven by the influence of the multiple business sectors thriving in Pune, ranging from IT / ITeS to manufacturing, healthcare as well as numerous educational establishments. Traditionally, these have consistently provided the right kind of fodder for success for economy hotels in any market.

Since 2007, the branded economy hotel supply in the country has increased at an average rate of 21% year on year, growing from a meagre base of approximately 2,200 branded economy rooms to over 10,400 economy hotel rooms – a nearly 5-fold increase. The growth was driven by a healthy mix of both global and regional hotel companies. While the Bangalore hotel market today accounts for the largest share of branded economy hotel rooms in the country, Pune comes in a close second with nearly 1,050 branded economy rooms.

As such, the city’s branded economy hotels sector accounts for 18% of the total branded supply in the market, above the national average of 15% of the total branded supply in the country. Over the next five years, Pune will witness an increase of more than 20% in branded economy hotel supply in city.  

While there is significant untapped potential for the economy hotel sector in the country, major impediments arising from inadequate infrastructure, unavailability of quality land parcels, high interest rates and the multiplicity of required approvals and licenses continue to bow down the sector.

 Pune economy hotels – existing inventory

Source: Track2Realty