By IE&M Research
The Pride Group has a successful chain of hotels at Pune, Nagpur, Ahmedabad, Bangalore, Chennai, Kolkata, Delhi, Goa, Dharamshala, Jaipur, Indore, Vadodara, Manali, and Puri. The conglomerate entered into the hospitality sector in 1988. S.P. Jain, Managing Director of the group, who created it from scratch with his sheer indomitable spirit, in a freewheeling chat with Indian Economy & Market, speaks about the journey and the problems Indian hospitality sector is facing.
You had a Consultancy firm, diversified into construction, and then happened Hospitality. What attracted you to change the track?
Basically I’m a professional, a Chartered Accountant. Early in my career I was a management consultant doing projects for others. But I was fascinated by service industry which is run by professionals and does not require the promoter to be present all the time. So jumping into hospitality sector was a natural choice. I opened my first 5 star hotel with 75 rooms in Pune which was a Greenfield project. But a 5 star hotel with 75 rooms are not viable so I had to invest more money to make it viable. It was difficult time and raising money was not easy. After that there was no looking back. Having been a management consultant I could identify ventures that had failed due to either mismanagement or financial problems. So when I found such ventures I started acquiring those in a fast expansion mode. First was a property in Nagpur which I renovated completely. Then in Ahmedabad which was half constructed. Kolkata was same but Bangalore and Delhi were again Greenfield.
We follow three models – acquisition, Greenfield and asset-light model. In the last one we provide sales and marketing support under our brand, and control day to day operation. All the power is vested to us and we make sure the hotel is run successfully. We’ve 30 sales offices with more than 100 sales executives. Secondly we have a dedicated clientele including hundreds of companies who regularly use Pride. That is our strength. We’re still into construction but we’ve a number of partners. Our consultancy firm was converted into NBFC. All these are run by professionals and are part of the group.
When we can expect an IPO?
Sometime back we were very keen, but the market was not conducive. So we abandoned the idea. We certainly have a plan – may be in early 2020.
What is the current status of Indian hospitality sector?
Two years back the industry had a tough time. Now a change has come primarily because the existing supply is very much digested by the market. This is a capital intensive sector. No new hotel is coming up whereas demand due to various reasons is increasing every year by 12-15% but supply at this moment is not growing correspondingly. New promoter has to take more than 100 licences and there is no single window clearance. So new entrepreneurs are not attracted to this sector where half of one’s energy is wasted in government offices. Good news is that with increased disposable income many Indians like to explore, to see different places. A healthy development in aviation sector is also fuelling this interest.
Now an Indian PM is promoting India vigorously. Do you find any change as a result?
Prime Minister Narendra Modi is a very dynamic man. As CM he has developed Gujarat which was nowhere on the tourism map two decades back. Now it is throbbing with activities all year and no domestic or foreign traveler can miss Gujarat. So he knows the importance of tourism. That is the reason whenever he is on a foreign soil he talks about it. He has created very nice impression about India. Worldwide people have started respecting India and are eager to see the country. There is no longer fear in minds of Europeans and Americans to travel to India. After all, if a PM says something people sit up and take notice. But let us remember, India attracts just 10-12 million tourists in a year. Switzerland attracts 5 times its population every year. And look at India – it has sun, rivers, sea, palaces, forests, hills. Infrastructure too has become somewhat good, so there is enough possibilities. If one foreign tourist comes then directly or indirectly 63 people work for him. This sector generates substantial amount of foreign currency and PM understands it well.
Any plan to collaborate with International names?
We already have a big number of foreign guests whose first choice in India is Pride. We vigorously market the brand overseas and over the years build up a strong international connection with travel agents and foreign companies operating in India. Pride has 30% occupancy of foreign travelers. We’ve created Pride brand based primarily on Indian culture, food and services. Today hospitality sector is not just a room to sleep in. People also want good restaurant, quality & variety of food, and best service. They want to remember the experience at your hotel. Gone are the days when company meetings and conferences were held in offices. Now even if a company wants to select higher executives they prefer to do the interview in a hotel. At all our properties trained professionals render incomparable services. Pride is a full hotel. It has business centers, meeting rooms, conference halls, restaurants, spa, swimming pool, indoor and outdoor entertainments and a well-stacked bar. We get offers from foreign brands but we’re proud to have our own. We’re giving them a tough fight and still winning. Only those promoters who have no knowledge about the industry look for foreign collaboration.
Where does India stand in terms of service and pricing?
We’ve far superior hotels here than in Switzerland. European hotel rooms are very small and they provide limited service; most of it is self service. Here rooms are luxurious, choices are more, with much better service and better quality of food at reasonable price – almost half. But there are a few very high priced hotels abroad that are better than India.
Do you think GST has been good?
It was a very bold decision and we all appreciate. Earlier it was very cumbersome exercise to file multiple taxes to multiple agencies. Now by filing one return the compliance part is taken care of. But the industry has some grievances also. We have two slabs – 18 and 28%. Such higher charges are nowhere in the world. This upper rate is killing the industry. As Chairman of the GST related Committee of our Federation I conducted a study of 20 countries, and the findings are submitted to the government. We’ve argued that whichever country has a higher GST rate their tourism has not grown. Some charge only 7.5% or a maximum 10% and results are in front of us – Thailand, Singapore, and Sri Lanka. So a high spender foreign tourist has choices around us. We’re sure the present government will understand the problem one day and will cap the charges at 18%. We’ve met CMs and tourism ministers of many states and apprised them. States like Goa have understood intelligently. They have two slabs – low during off season and higher on peaks. This should be replicated by others.
Today India needs an industry which generates more jobs and earns foreign currency. In Diamond trade, India hardly retains 10% of the foreign currency it earns, rest goes back. But in tourism it retains 100%. So the government must give a preferential treatment to this sector. When we construct a hotel, except the 10% of white color jobs the rest we employ local people. Then the indirect employment happens – farmers, autowala and others – and the development goes to the lowest level of society. India is growing and tourism potential has not been fully exploited yet. Forget about the 20 million targets, Indian promoters are capable of bringing in 100 million tourists every year if government supports them. Take my words; it can change the very face of Indian economy, better than what IT sector did.
Do you have any expansion plan?
More than `500 crore worth of expansion is on. We’ve acquired 7 acre land in South Goa. In Nagpur we bought the adjoining land and building additional 75 rooms. We also have plans in Pune and Mumbai and hope to add another 500 rooms in next three years. We have our presence in nine states with 2000 rooms at present but by 2022 we’ll have 3000 rooms and the target is to cover all the Indian states.
What makes Pride group different?
First it’s our service. Then all the Pride Hotels are equipped with tastefully designed banquet halls, spacious meetings and conference rooms, modern and luxurious guest rooms, multicuisine restaurant, all-day dining, and bar along with amenities like gym, spa, and swimming pool. Pride offers unique environment and acts as a natural catalyst to memorable stay, vacations and events. Our in-house training facilities make us unique. We also understand our social responsibilities and contributed towards Kerala Flood Relief Fund.