PUNE CITY

Investment Low difficulty

Leisure & Tourism Interviewer-led case

This case discusses a fictional investment strategy for developing the tourism industry in Pune, India.

The case covers all aspects of the interview scorecard.

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Problem definition

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The City of Pune has an economy based predominantly on the Education and IT sectors. The City’s

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Council would like to diversify the economy by leveraging its historically significant sites and numerous
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lakes to attract tourism.
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The central Indian Government is considering offering a $1bn investment to the city for tourism. To
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secure the funding, Pune’s council must demonstrate they intend to use the money in the most effective
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way possible to grow the local tourist industry.

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The Council has asked you to suggest some initial ideas for use of the funds.
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Additional information
If asked, please share that:
• Pune’s ultimate goal is to simply increase the value of the city’s economy to the benefit of its citizens

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 Question 1 (Structuring)

How would you structure your approach to the question?

Possible answer

1. Identify potential investments

a. Tourist sights and destinations
b. Infrastructure (e.g. hotels, transport options, tourist offices)
• What simply needs upgrading?
• What new infrastructure is required?

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c. Brand and marketing improvements

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2. Quantify return on investment of each type. For each potential investment, define:

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a. Investment required (initial cost and operating costs, where applicable)
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b. Return:
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Estimated increase in visitor-days per year

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• Estimated increase in spend per visitor, per day

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3. Additional criteria to qualify investment

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a. What investments are necessary vs. “nice to have”?

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b. How does Pune’s unique positioning as a brand/city impact investment decisions? (e.g., “the city of
lakes” vs “the city of Ancient Indian tradition”)
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 Question 2 (Numeracy)

One type of investment the city is looking at is the renovation of its monuments. Having considered a
number of options, three have been shortlisted as potential renovation investments. [Share exhibit 1]

Casual visitors spend $5 on their visit, whilst tourists spend $50 per visit. All three monuments are
currently closed, so the visitor numbers would be entirely incremental.

The Council would like to know which monument would generate a positive return on investment
in the shortest time possible.

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Additional information

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If asked, please share that:

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• The gross margin on spending by visitors is 50% - if the candidate doesn’t ask, interject and mention

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this before they run calculations
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• Casual visitors are defined as those who come to Pune for education or work purposes and happen
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to visit historic monuments during their stay. Tourists are those who visit Pune specifically for the
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purpose of tourism
• Revenue refers specifically to direct income from each monument (e.g. entry fee, gift shops sales,
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snacks and other consumable sales at the monument)

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• The renovations would take the same length of time to complete for each monument
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Possible answer
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Number of years to break-even: Initial investment / Profit per year (Margin per visitor x number of visitors)
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e.g. Monument 1: $500M / (700,000 x $2.50) + (300,000 x $25)

= $50M / ($1.75M + $7.5M)
= 5.4 years

Monument 1: 5.4 years

Monument 2: c.4 years
Monument 3: 5.8 years

Monument 2 would turn a profit around 1.5 years faster than the closest alternative, so based on our
straightforward break-even criteria it should be selected for renovation.

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Exhibit 1: Visitor information by monument

Yearly % of Casual % of Tourists Investment

visitors Visitors needed for
renovation

Monument 1 1 million 70% 30% $50million

Monument 2 0.4 million 30% 70% $30million

Monument 3 0.5 million 50% 50% $40million

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Question 3 (Judgment and Insights)

We’ve identified that Monument 2 seems the preference from a straightforward break-even analysis.

What other factors could complicate this in reality, such that we might favour one of the other
monuments for investment?

Additional information
Guidance for the interviewer:
• You should look for the candidate to hit on one of a couple of points related to the fact that direct
spending at the monument isn’t the only factor that matters. The key thing is that a candidate hits on

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these insights; an answer needn’t be heavily structured

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• Once the candidate has responded, conclude that despite these all being good points to discuss, the

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client determines that Monument 2 remains the best investment opportunity

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Possible answer
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From a monetary perspective:

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• In terms of future return, the alternatives might be favourable. We’ve looked at the quickest
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investment to break-even, but others may yield better returns over the longer run
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Even if direct spending is lower, Monument 1 brings more visitors. They’d perhaps also spend more
in restaurants and other venues nearby – generating more indirect economic benefit
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• It’s possible Monument 2 might require additional renovation investments sooner than the others. We
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should check expectations for future renovation cost on each of the monuments
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From a non-monetary perspective:

• It’s possible that Monument 1 or 3 might be more eye-catching and useful for branding and
marketing of the city
• Monument 2 might be located in a more inconvenient place – if there are public transport issues, this
might reduce visitor numbers in practice

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Question 4 (Judgment and Insights)

Pune airport is currently running at 90% capacity and there is concern that additional passengers would
create delays.

How would you evaluate whether funds should be used to expand capacity at the airport, for
tourists travelling by plane?

Additional information
Once the candidate has shared their methodology and approach, please share the following before
moving on to the next question:

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• Most international tourists land in Mumbai and travel to Pune by road; local tourists mostly travel

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by road also

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• Pune airport cannot be expanded with its current runway infrastructure. In order to increase the
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capacity of the airport, an additional airport runway must be built. This, plus the associated new
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terminal and other infrastructure, would require investment of $3bn
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Possible answer
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1. How likely is the risk of over-capacity?

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a. What % of tourists are traveling to Pune by air?

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b. How many additional tourists by plane would bring the airport to 100% capacity?
c. How does this figure compare to the total expected demand from tourists?
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2. What short-term and long-term options are available to increase air passenger capacity?
a. Can the number of available flight slots be increased? E.g. extend operating hours by 1-
2 hours either side of the day to add an additional 6-10 flights per day
b. Can the check-in, security and seating facilities be expanded with minimal investment?
e.g., use self-serve where possible

3. How much funding is required for capacity expansion of the airport?

a. How does this cost compare to the cost of delays and disruption of flights?

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Question 5 (Creativity)

The council know they must invest into the City’s infrastructure to attract and accommodate additional
tourists. However, they also want to put Pune on the tourist map and compete with nearby tourist cities
such as Mumbai, so they need to be creative with their ideas and investment decisions.

How would you identify effective infrastructure improvement projects in Pune? What investment
ideas could help Pune stand out?

Possible answer

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What infrastructure is required?

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- Survey of tourists to understand their experience/expectations in Pune

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- Interview vendors connected with the tourism industry (e.g., hotel owners, transport providers)

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- Study best practices followed by tourism departments in similar cities elsewhere in the world
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How can Pune’s infrastructure stand out?

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- Offer free buses to all tourists

- Build an app specifically for the city to help visitors find attractions, restaurants, and hotels
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- Create specific busking locations for art, dance and theatre displays in the streets
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Question 6 (Synthesis)

Based on the information we’ve reviewed, how would you advise the Council of Pune?

Possible answer

I recommend the council begins with the renovation of the second monument and conducts a study
involving visitor interviews to shortlist investment projects on the infrastructure side.

Based on the information we have on air passengers, investment in airport facilities is not required and is
unlikely to impact the growth of tourism, since most tourists arrive via road.

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If we had more time for investigation, I would look further into how Pune could uniquely position itself as

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a tourist destination, and perhaps consider branding and marketing investments for the city.

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