An oversupply of rooms in Pune’s hotel market is forcing promoters to either scrap the projects or shift to smaller ones to stay in business. While major players, including Hilton, Leela and Lalit, scrapped their projects for Pune, another four major existing hotels in the city are reported to be up for sale, according to market sources. Several others are struggling to improve occupancy rates.

?At one point, around 32 new hotels were planned in Pune in 2007, this when the city had around three hotels for over 60 years and, then, there was this sudden boom,? said Ravi Verma, immediate past president, National Realtors Association.

The Federation Of Hotel & Restaurant Associations of India (FHRAI) has spoken of around 44% of hospitality projects planned in Pune being phased out or changed to either residential or real estate projects.

According to reports given out by the FHRAI, around 2,500 rooms that were additionally proposed to be built are not being considered for development now. At present, supply of 4,691 rooms is available in Pune and an additional 5,545 rooms are proposed to be developed in the next five years, he said.

The newest player on Pune’s hospitality scene ?Hotel Hindustan International India (HHI), headquartered in Kolkata, had an original plan to establish a 150-room hotel in Hinjewadi, where majority of the city’s IT industry is located.

?However, since the market was not too good, we dropped the plan and decided to come up with a smaller 86-room project in Viman Nagar, a location where there is scope for IT industry to grow,? DK Jaiswal, CMD, HHI said.

He is counting on the hotel’s F&B service and a night club to score over the six odd existing hotels in the same locality. According to a report by HVS Global Hospitality Services, the city saw the largest addition in new supply in 2010/11 (76%, 2,019 rooms) and expectedly resulted in the highest drop in RevPAR ( revenue available per room) (26.4%).

Kaushik Varadharajan, MD, HVS Global Hospitality Services, says there is a temporary oversupply in Pune and this was having an impact on the occupancy and ARR. ? Pune has seen a strong increase in supply in the last couple of years and is now at a point where the occupancy is stable,? he said.

?Earlier there was an expectation that Lavasa would compete very strongly with Pune. However, work at Lasava has slowed to a great extent. Now, the hotels in Pune are focused to a great extent on improving occupancy,? Varadarajan said.

Occupancy in Pune witnessed a negative growth of 11% and ARR ( Average Room Rentals ) went down to R4,827 from R7,948, a record high ARR that happened in the year 2007, Barot said.