Small is the new big

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Thanks to the booming economy and a cash-rich middle class, India’s tier II cities have been seeing a spurt in hotels in the recent past. Real estate developers see the presence of profitable business opportunities in these cities as the main reason for the up in the number of these hotels. And, there is a long line of hotel operators and investors looking to set up such properties in these cities.

Gone are the days when large hotels were seen only in metros. Be it luxury chains like those of the Taj, Oberoi or ITC, or for that matter mid-segment chains like that of Lemon Tree Hotels, most of them are foraying into the smaller cities. It is the age of non-metros.

The development of airports, roads and convention centres has also created a platform in the smaller cities for these hotel chains to flourish. Not only that; The foray of IT companies, BPOs and retail industries into tier II and even tier III cities has generated enough purchasing power among the people there and therefore, created a ready clientele for these hotels. Cities like Pune and Gurgaon are witnessing a rise in demand for quality rooms due to the development of its IT industry and BPOs. Hotel chains are beginning to realise the potential of these small but yet untapped markets.

Despite the trend, it would be incorrect to say that the focus of hotel chains is shifting to tier II cities. Akshay Kulkarni, director, South Asia, Cushman & Wakefield Hospitality explains: “Hotels have always gone where there are demand drivers — for example when Aurangabad was a hot destination on the Buddhist trail, hotels came up there. So it would be unfair to say that their hotel industry focus is now shifting. As and when new centres emerge where new business drivers set up shop, hotels will follow,” he adds.

Some of the Tier II cities which have always had hotels as part of the mainstay are — Jaipur, Agra, Chandigarh, Amritsar, Kochi just to name a few. Fortune Park Hotels, which is currently present in cities like Jaipur, Jamshedpur, Vapi, Vijaywada, Madurai, Shirdi, Pune, Darjeeling, Ooty and Tirupati, is planning to augment its presence in other tier II and III cities, in keeping with the growth.