Smaller Cities Driving Hotel Boom in India

Travel

Skift Take

As the Indian traveler drives demand to lesser explored domestic destinations, major brands are finding opportunities to grow in the Indian hinterlands.

The hospitality industry in India is undergoing a rapid expansion. According to data from real estate services firm JLL, a total of 131 hotels opened in the country between January and September 2023, with another 182 properties signed. That’s over 8,200 keys, with more than 16,000 in the pipeline. 

This boom in the hospitality industry in India has moved beyond tier 1 cities. The JLL data shows that during 2023, as many as 217 new hotels in tier 2 cities and 176 hotels in tier 3 towns were opened and signed, while this figure stood at only 61 in tier 1 cities. 

Recent openings in tier 1 cities include Taj The Trees, Mumbai; Moxy Bengaluru Airport Prestige Tech Cloud; and Fortune Park East Delhi. 

In less explored tier 2 markets, there were several openings, including: 

  • InterContinental Jaipur Tonk Road in Jaipur, Rajasthan
  • Radisson Blu Pune Hinjawadi in Pune, Maharashtra
  • Le Méridien Amritsar in Amritsar, Punjab
  • Vivanta Jammu City Centre in Jammu, Jammu and Kashmir
  • Holiday Inn Guwahati in Guwahati, Assam
  • Grand Mercure Agra Fatehabad Road in Agra, Uttar Pradesh
  • Lemon Tree Hotel in Bhopal, Madhya Pradesh

Smaller destinations witnessed the openings of: 

  • Ginger in Durgapur, West Bengal
  • Gorbandh Palace, an IHCL SeleQtions hotel in Jaisalmer, Rajasthan
  • Park Inn by Radisson in Ayodhya, Uttar Pradesh
  • Fortune Park in Aligarh, Uttar Pradesh
  • Lemon Tree Hotel in Dapoli, Maharashtra

Movement Towards Remote Regions

Tier 1 cities in India have a significant level of penetration for all brands and across all hotel categories from budget to luxury. Smaller towns were catered to by non-uniform and unbranded hotels. 

However, as less explored smaller towns begin getting rapid infrastructure upgrades, brands see an opportunity for business. This has been enhanced by federal schemes such as ‘Dekho Apna Desh’ (Explore Your Country) that focus on highlighting unique experiences of the Indian hinterlands. 

In an earlier interview with Skift, Ranju Alex, area vice president for South Asia, Marriott International, said Marriott is expanding into tier 2 and 3 cities in response to the changing behavior of consumers.

Last year, at the signing of IHG Hotels and Resorts’ voco Amritsar Airport, Sudeep Jain, managing director for South West Asia, said the company is strategically expanding in secondary markets across India.

The growth in remote parts of the country has also been driven by a boom in religious tourism in places such as Ayodhya, Katra, and Sirmaur, and increased infrastructural focus on the Northeastern states.

Tailoring Offerings to Mass Market

This expansion into smaller towns corresponds with the hotel category seeing the most activity – midscale. This formed more than 55% of both newly opened as well as signed hotels during 2023, JLL data revealed.

The Hotel Association of India has noted in its report, Vision 2047, that between 2012 and 2019, there was an influx of around 20 midscale brands. 

KB Kachru, chairman emeritus and principal advisor, Radisson Hotel Group, South Asia, said, “The growing demand for branded accommodations in emerging markets, particularly in tier 2 and 3 cities, highlights the country’s appetite for quality hospitality experiences.” He added that about 50% of the group’s portfolio is in these markets. 

In November 2022, Radisson launched India-specific midscale brand Park Inn and Suites by Radisson to scale the brand in tier 2 to tier 5 locations. 

Indian Hotels Company (IHCL) is also looking at coming up with a full-service brand specifically tailored to the mass market in tier 2 and 3 cities. 

During a recent conference call, Giridhar Sanjeevi, IHCL’s executive vice president and chief financial officer, talked about the potential of untapped markets. “Given the size of India, the opportunities are immense. We have opened in Tawang, for example. These are all virgin territories. This has happened because of the growth of infrastructure development in India,” he said. 

The Skift India Summit in Delhi-NCR from March 19-20 will shine a light on the hospitality boom in India.

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