Exclusive Interview with Atul Chordia and Ranjit Batra, Panchshil Realty
In a candid interview, they talk about what luxury means to them, the pulls and pushes of working with brands, the need for better training and talent, and why The Ritz Carlton Pune will prove to be a game-changer
Panchshil Realty is a name synonymous with luxury. From its ultraglam residential projects to its equally striking commercial ones and its out-of-the-box branded hospitality projects, it has come to redefine the luxury space with an emphasis on high-voltage glamour, uber-luxury and its attention to detail. Atul Chordia, Chairman and Ranjit Batra, President – Hospitality Management are the men of the moment, as The Ritz Carlton Pune makes its debut on India’s hospitality landscape.
Lto R: Ranjit Batra, President – Hospitality Management & Atul Chordia, Chairman, Panchshil Realty.
Given their deep-seated passion for innovation, their eye for detail and their insistence on not following any discounting policies that are detrimental to the luxury hospitality business and image, the two have ensured that Panchshil’s hospitality business always tops the game. In a candid interview, they talk about what luxury means to them, the pulls and pushes of working with brands, the need for better training and talent, and why The Ritz Carlton Pune will prove to be a game-changer in not just the Pune market — which is experiencing a strong demand despite a decline in the auto industry, but also in India’s luxury hospitality.
Going back in time, what made you step into the hospitality industry?
Atul Chordia (AC): I began my journey as a real estate broker in Pune city, after which I got the opportunity to work in project management for certain other industries. In 2002, I built residential projects and then in 2004, with Foreign Direct Investment (FDI) opening up the Indian market, I was able to garner large investments for my company from IREO, Merrill Lynch and Morgan Stanley. My vision was to create an impactful change in the real estate segment in Pune by leveraging the huge capital base.
We began building customised commercial spaces and leased them out, instead of selling them, to tap into the commercial revenue stream. Our work created a buzz in the market and we completed the IBM building, which was a 5-lakh sq.ft. large project, in under 180 days. We realised that businesses were flourishing in Pune and there was a growing demand for premium hospitality, with only Meridian, Holiday Inn and Blue Diamond available as viable options. We seized the opportunity and infused a new standard of luxury hospitality in the city. The strategy was to add a number of rooms in geographies where there was a strong business presence, leading to a heightened demand. We started construction on all the hotels simultaneously and sequentially launched them, one after the other. In 2004, we were designing hotels with global brands such as Marriott, and in 2007 we opened the first hotel Courtyard Marriott.
The decadent tea lounge in the lobby of The Ritz-Carlton Pune.
It was a gut feeling that made me enter the hospitality industry. It was not a calculated move. We opened a JW Marriott with 418 rooms that offered 5-star luxury and also introduced Pune’s largest indoor banquet hall. Fortunately, Ranjit looked after the operations while I focused on building the hotels. We were very clear that we always wanted big brands to operate the hotels we built, and we made sure that we have proper control over the operations to ensure they follow Panchshil's standard of quality and detail.
From day one, all our hotels have been profitable. I never lost money in hotels like other hoteliers. While every hotel takes a loss for a minimum of one year at least, we are the only hotel group in profit from the second month onwards.
How did you ensure the profitability of your hotels from the word go?
AC: My approach was to locate my hotels close to our commercial establishments, thereby creating demand by the virtue of their proximity to businesses. Sound marketing strategies are another core element that ensured the success of our hotels and delivered high occupancy from day one.
Paasha, the exclusive rooftop lounge and restaurant at JW Marriott Pune, is popular with the locals.
What are the strengths of Pune as a hospitality market?
AC: Pune offers a growing commercial ecosystem, which has garnered attention from Fortune 500 companies, mid-segment brands and bootstrapping start-ups. The influx of commercial revenue and resources requires adequate support from the hospitality industry. A growing number of expats are frequenting the city and several workshops are being held. All these activities offer potential benefits for the hospitality market. Another source of revenue generation for the hospitality market in Pune are the events, conferences and weddings segments, which have significantly increased over the last few years. Pune is a price-conscious market but with commercial growth, we have seen that the occupancy at our hotels is stable and on the rise.
Ranjit Batra (RB): The Pune market has a huge demand for premium hotels from business travellers. In addition to serving as a manufacturing hub in western India, the city has developed into an important IT/ITeS centre. The availability of large commercial floor plates, along with a young and educated workforce has driven the rapid development of the city. Proximity, as well as the ease of connectivity to Mumbai, has helped the hospitality market in the city.
In the past few years, a staggering increase in room supply has resulted in a downward spiral in both occupancy and Average Rate Performance, which has overshadowed the surge in demand and questioned the strength of the market. However, there is a silver lining. The slowdown in the new supply, coupled with a robust and continuous increase in demand, has helped the city's hotels to perform well in terms of occupancy and average room rate.
Pune is a fairly steady market. It is very strong in the STR; it does see a dip on the weekends or in project-based movements. Now we are also seeing Pune being geographically defined in different parts the east and west, so there is steady business and strong growth. Over the years, the rapid growth in Pune has resulted in hotels coming up closer to the source markets, which span areas such as Hinjewadi, Talegaon and Chakan as one block, and then there is Pimpri as the other block. The third is in the centre of town, closer to the airport, an area you can define as Nagar Road, where the majority of the hotels are located. Some source markets are on the other end of the town, such as Ranjangaon, Hadapsar and Magarpatta. Then there are project-based movements, since Pune is an engineering hub with a lot of automobile and engineering auxiliary plants. There are huge movements when a plant is being set up, or when a new assembly line on a big scale is being put in.
Among the few project movements are Cummins, Deutsche Bank, ABS, Rocket Software, UBS, HSBC, Barclays, Citibank, Credit Suisse, Corning, Ericsson, Tetra Pak, Johnson Control, Schlumberger, John Deere, Telstra, IAG, Insurance Australia, Bank of Montreal, Hotelbeds.Com, Western Union, Thames Water, Capita, VW, Wurth, ThyssenKrupp, TKIS, Uhde India and Fujitsu. The other areas that contribute to the occupancies are the sports activities near Balewadi, which feed the Hinjewadi hotels.
What are your expansion plans for your hospitality group?
AC: We have a total of seven hotels and are now looking for opportunities outside of Pune. We are planning to acquire hotels, refurbish, rebrand and re-launch them.
RB: One of our key strengths is effective asset management of properties and we have the ability to leverage the skillsets of our real estate business to refurbish properties. Hence, the focus is on acquiring properties where there is a potential for value un-locking by using our skillsets. We are open to any geography in the country as well as internationally. We are very fortunate that the brand trusts Panchshil to deliver a great product and has more or less left us with a free hand, well aware that we will do a fabulous job.
As a developer of hospitality projects in the luxury space, what are your biggest concerns and battles?
AC: Navigating through the process of acquiring permissions for the hotels is one of our biggest concerns. We need close to 106 permissions to ensure our hotels are operational and this process is often time-consuming.
RB: Given our luxury mindset, we generally tend to build hotels with passion. We opt for specifications and materials that are of higher quality than even those required by the brand. Of course, that does not help us to get the rates we charge, but it does have an indirect benefit of reducing Capital Expenses (CapEx) on the hotel in the long-run. As far as the luxury end of the hospitality industry is concerned, there are a few points and issues to ponder over: Do the people understand luxury, to begin with? Will the operator choose an easy route by discounting the rates? Is the operator spending enough on branding or do they expect us to contribute towards the branding exercise? These are questions we are still grappling with.
I am also very concerned about a premium product being sold as a wholesale product through corporate discounting and various inclusions. Sometimes, it is very confusing to find the true brand culture that will eventually deliver luxury. Everyone in the team is a mix of so many different hotels, not necessarily luxury in most of the cases, and with so many different DNAs floating under one roof, the final experience can be compromised.
What marks Panchshil’s hospitality projects?
AC: Design, by far, sets us apart from other real-estate developers. I prefer a straight-line design, which focuses on functionality. We emphasize meticulous service design and ensure that our construction quality stands the test of time. We also leverage sustainable technologies in our design and construction techniques that reduce the dependency on traditional resources. It is these qualities that have earned our projects the Gold & Platinum LEED Furthermore, we under-stand the luxury mindset and can curate the ideal experience for our customer, which sets us fundamentally apart from several other builders who just focus on design or construction. We design keeping our end-users in mind. When it comes to speed of construction, on-time delivery and high-quality construction, Panchshil projects check all boxes. I also love to infuse my hospitality projects with beautiful artworks and sculptures from around the world.
JW Marriott Hotel Pune is a visual play of several textures and opulent surface materials, dominated by a sumptuous chandelier.
What inhibits the growth of the hospitality segment in India, particularly in the luxury segment?
RB: With such strong domestic luxury brands in India, I am a strong believer in the fact that we understand luxury more than other countries. The growth in the luxury segment is normally driven by a culture, and culture percolates down from the top. So somebody has to push luxury from an operator perspective. Tying up with the right developer who understands luxury is the first step in the right direction. In a big organization, the concept of luxury can sometimes be lost in transit due to various people involved in different stages of the hotel, v/s a brand such as The Oberoi Group, which has 100 per cent clarity (about the concept of luxury) from the top to the bottom. Being on top of the pyramid, it gets thinner to find the customers willing to pay the high rates. But it has been proven over the years that luxury always does better in all the cycles and offers higher profitability.
What policies would you like the government to implement to make the hospitality industry more dynamic?
RB: There are several that can be considered: Electricity should be provided at concessional rates to the industry; incentives for generating foreign exchange should be offered to hotels run by foreign brands, and an establishment of a single-window for all operating licenses is imperative.
What are the pulls and pushes, the challenges of working with brands?
AC: We have had a strong working relationship with Marriott and Hilton. We have worked closely to align our vision. Now, as we are expanding our hospitality portfolio, we are open to working with all brands, especially with the ones who invest in training and marketing. We will continue working closely with Marriott. Currently we are working with Amari Hotels & Resorts, Anantara and Hilton for our future projects in Pune and overseas.
JW Marriott's sprawling suite boasts a private jacuzzi area.
RB: The balance between pulls and pushes changes over a period of time, as the relationship with the brand operators stabilizes and matures. At the initial stages of opening the property, there is a lot of push required, of course to be done with velvet gloves. The initial few months after the opening determines the property’s overall success in the long run.
As for the challenges, well, this is an area which takes a lot of my attention; both the pain points and the happy times are shared openly with our partners. Marriott International is one of the biggest partners in our portfolio, so the pulls and pushes have reduced over the years with a common understanding and the ability to work together. I feel the partners have to also understand the pain points that owners experience. We have come a long way. I think if I had to put something on top of the list of challenges, it is the lack of training across the entire rank and file, and the lack of ability to offer exposure to brand standards and the relevant needs of the customers.
The second challenge would be the big dark hole that exists in the name of ‘International Marketing Fund’. We have no clue where our money goes and how do we benefit from this contribution to the worldwide initiative of getting business and branding. Rather, we would be happier if there is a specific India marketing fund instead.
As an asset manager, what does Panchshil bring to the table?
AC: Hotels are difficult assets to make within a budget but at Panchshil, we have always managed to complete our hotels within the budget and ahead of time. Hotels are a very difficult asset class to build and maintain; they require a different skill set, a great team, clear vision, and ample liquidity of funds. Every hotel can go for a toss as far as budgets are concerned. So for the last mile funding, you should have deep pockets.
RB: We have a rate uplift strategy backed by strong revenue management. We continue to be more demanding from our operators to offer us good talent. We do not shy away from emphasising that we will not compromise. We put our foot down on all F&B discounts or any such strategies that create a culture of offering free services.
We communicate our clear set of goals to the management company right in the beginning. We have created our cluster purchase. We understand the depth of the management companies and their resources, so we ask the relevant questions and tap into those resources. We also promote a culture wherein the operator is responsible towards the owner’s money and property, and its upkeep. As we continue learning, we would continue to ask for better quality HR training, review managers and sales managers.
We would also look at splitting revenues and sales away from the general manager’s direct responsibility. That would be a healthy way to work in a hotel. The general manager is eventually on top of all things, but the revenue and sales manager should have very high seniority in the hierarchy and a big say in specialised matters.
We are also pushing our operators to offer the best rate guarantee and advertise it across all mediums so the customer knows that they can come directly to the operator’s website or app and make the bookings, rather than go through third parties. Also, on a separate note, I think the operators don’t do enough to educate the consumer.
Our industry is known for policies of promoting from within and often ends up putting an inexperienced or not sufficiently skilled manager in charge of certain departments or operations, without proper support teams. This means we are taking a huge risk with our investment. So, we have to be very alert. I respect general managers who are the first to admit that a particular area is not their speciality and let the departmental head drive that area, while he or she continues to offer a support structure to their peers. I think that is a great quality for a GM. Often GMs who pretend to be know-it-all are the most destructive. It takes more than pleasing guests to make money. We need real business managers as general managers.
The protocol of communication and accountability between so many who report to the GM has to be clear, since he has to report to multiple people. I set very clear goals for the management company and the GM right in the beginning, since every property has different strategies or goals — whether short term or long term. India has just got its second The Ritz-Carlton Hotel, with The Ritz- Carlton Pune.
To you personally, as well as to the developers, what does The Ritz-Carlton brand represent?
RB: As the tagline goes, ‘It is (about) ladies and gentlemen serving ladies and gentlemen. I think that says it all. Ritz defines style, opulence, personality. It is a hotel where you will experience all these three attributes, a hotel that will offer you a sense of quality in everything that you see, touch and feel.
The double-height ceiling, clad columns and a stunning cascading chandelier in the lobby helps enhance the luxury quotient of JW Marriott Pune.
What will set The Ritz-Carlton Pune apart from any other hotel in the city?
RB: The luxury experience begins right at the moment you step into the hotel, in the lobby, which sets the hotel apart, especially in our part of the world. We have other luxury hotels that I have personally studied and which don’t do too well. One of the bigger reasons is that people expect grandeur from the lobby and well appointed F&B outlets. We can, of course, debate and discuss about what really represents luxury. To me, luxury is all about the people working in a hotel, and the way they deliver the experience. It is about the way a brand makes them feel the moment they associate with it. The Ritz-Carlton is an extremely aspirational brand. We already have one Ritz in the country. I think the Pune Ritz would set the brand apart from any other hotel. In my view, it is one of the best hotels to have opened in the last 10 years in India.
Architecturally conceptualised by Madhav Joshi and designed by PIA from Bangkok, The Ritz-Carlton Pune redefines grandeur. We have paid great attention to even the tiniest of details relating to the product touch and feel points, which makes a lot of difference. The Ritz-Carlton Pune has got a classically modern look. Pune has rarely seen a hotel that is both classic and modern at the same time, particularly in the interiors.
On the F&B front, I have personally made sure that we have gone into the minutest of details, with the right quality of equipment. We have spent lavishly on the interiors. We have also gone into the minutiae, having learnt over the years the flow of banquets with Alfresco and the combination of entry points into the hotel, especially for hotel guests v/s banquet guests. At The Ritz-Carlton Pune, we have a special area for in-house guests to check-in and check-out, which is at a little distance from the main lobby. The F&B offerings are marked by great landscaping, great outdoor banquets, a high energy Japanese restaurant, a great rooftop restaurant with an amazing bar overlooking the Golf course — it is all here. The Ritz-Carlton Pune delivers several destination-specific experiences: wedding and high-end conferences; a view of the golf course; proximity to the airport; convenience access for offices around, and a great alfresco indoor-outdoor floor.
Does the city have the depth enough to be able to afford the kind of ADRs commanded by The Ritz-Carlton Pune?
RB: Considering our inventory of only 200 rooms, I feel very bullish about the ADRs. I feel we can pull the ADRs 30-50 per cent beyond the existing market, which is already achieving good numbers. The indication of us signing RFPs and wedding enquiries reveal that this is an easily achievable target purely based on the product and the brand.
What were the challenges of setting up The Ritz-Carlton Pune?
RB: The biggest challenge was based on where The Ritz-Carlton opened its first hotel. Bangalore opened first with all its challenges and fortunately, we have learnt a lot from them and so has our operator. Most of the understanding of The Ritz-Carlton is now localized and the area team in India is looking after The Ritz-Carlton brand hotels. They are much more connected with the reality on the ground and can move much faster in terms of decisions. We have had no major challenges while setting up The Ritz-Carlton Pune because of our experience in building so many hotels and using the best international consultants and architects. Our chairman also made sure that there is no interruption in the supply of money at the time of completion.
If I was The Ritz-Carlton boss, I would get the best talent in two departments — HR and training. These are the areas that the international hotel operators take very lightly, but the domestic operators do a fantastic job. The international players do not offer training in a structured manner, the way the domestic operators do. The process of selection becomes the key defining moment for good quality people, which, if left in the hands of an inexperienced HR, can do huge damage to a property.
What sort of opportunities does Pune offer a brand such as The Ritz-Carlton?
RB: I feel there is an opportunity for every hotel that opens up in Pune, or in any other city or destination in the world. The question is: What rate would we be able to attract for the product eventually? Opportunities are immense; we have the right mix of F&B and rooms. We have limited rooms as well, which offer us great opportunities for a healthy P&L, provided we get our efficiency in place. It is mainly the business travellers who come to Pune. A blend of the automobile industry and IT contribute to the growth factor. We have a mix of MICE businesses, with a healthy growth of non-qualified NQ business.
What are the innovations you have brought in to add newer streams of revenues for The Ritz-Carlton Pune?
RB: The new streams of revenue would be to focus on the product and demand premium in all areas such as the executive lounge, which is not complimentary. Then there is the party room, which can hold 20 to 25 people. And the third revenue stream would be the coffee shop, where we have three well-defined kitchens, ensuring that it is a cut above the rest of traditional hotel cafes. We also have The Ritz-Carlton Pune tea lounge in the lobby.