Branded Hospitality, Beyond Metros

By Swarnendu Biswas

Like all other facets of life and times, hospitality industry is also going through changes. One of the important changes or rather transitions that has been taking place in India’s hospitality industry during the recent years is the significant channelising of investments of branded hospitality projects in tier-II and tier-III cities of the country. Patna, Dehradun, Ahmedabad, Chandigarh, Madurai, Kanpur, Kochi, Vadodara, Jodhpur, Nashik are some examples of tier-II and tier-III cities of India.

Even a decade earlier, hoteliers and real estate developers investing in massive hospitality projects in tier-II and tier-III cities of India, unless it was a conventional and famous tourist destination, were rarity. But it is no longer so. Now even some of the tier-IV cities and small towns of India which are also not tourist destinations in conventional sense are showing potential to attract considerable investments from branded players in India’s hospitality industry. 

Four Points by Sheraton Mahabalipuram Resort & Convention Center, in Mahabalipuram, Tamil Nadu, City Sarovar Premiere Jaipur, Grand Mercure Vadodara Surya Place, Novotel Kochi Infopark Hotel are only four of the many such examples of recently opened branded hospitality properties in non metro cities, and towns of India. A few months back, Radisson entered Jodhpur with Radisson Jodhpur.

Reasons behind the Trend

There are various reasons behind this development. Prohibitive prices of real estate in metros of India, significant increase in disposable incomes among segments of people in small cities and towns of India during the last decade-and-a-half, the growth of industrialisation and tourism appeal in many of the tier-II and tier-III cities of India during the same period, the heightened popularity of destination weddings and the growth of MICE segment in India’s hospitality industry during the last few years are some of the factors influencing this trend.

Improvement of infrastructure and connectivity in these cities during the last decade can also be attributed as the reason for fostering of this trend.

Besides these, the labour costs in tier-II and tier-III cities of India are lesser on an average, as compared to our metros and other tier-I cities, and thus a hospitality property running in these cities is expected to entail less operational cost on an average, than if it runs in the metros.

“With increasingly prohibitive land cost, high supply of room inventory in metros of India is becoming extremely challenging. The tier-II and tier-III cities of the country offer long-term opportunities and in my view it is good for hospitality players to be early movers in this area,” asserted Ramendra Pratap Singh, General Manager, Radisson Noida.

“The major focus for leading hospitality players operating in India, in the coming years would be our tier-II, and tier-III cities,” feels Pankaj Saxena, GM, Radisson Blu Pune Hinjawadi.

“This is mainly to keep up with increasing demand as many of these cities are witnessing lots of industrial investments and an increase in domestic travellers. At the same time, the paucity of supply in quality accommodation in these cities are attracting leading hotel companies to invest in mid-scale, budget hotels in tier-II and tier-III cities to cater to the demands,”  he added.

“The potential for growth in India is now in many tier-II and tier-III cities. These cities have great opportunities for both business / industrial growth as well as in terms of tourism,” opined Varun Sharma, Director of Operations, Clarks Exotica Convention Resort & Spa, Bengaluru.

“Governments are setting up SEZs in smaller cities, creating more employment opportunities.  Naturally, in this climate there will be requirement for more hotels in these spaces, with more business travellers coming to these cities. Presently, there is a vast gap between the actual on-ground requirement of hotels, and the hospitality infrastructure currently present in many of the tier-II and tier-III cities of the country. The spending capacity of people in these regions is also growing. Hotel brands are realising the immense opportunity for growth in these areas and expanding accordingly in these cities,” he elaborated further. 

In fact, hotels and resorts in small towns, located in industrial belts or close to industrial belts can garner lucrative room revenues.  Take the case of Noor Mahal, a five-star property, located in Karnal, a nondescript tier-III city which is not known for any breathtaking tourist attractions.  However, the hotelier made an intelligent decision by coming up with a much needed five-star property in Karnal, as the town is in close proximity to four important business districts of Haryana, which are Panipat, Yamunanagar, Kaithal and Kurukshetra.

This location can make Noor Mahal an attractive MICE destination for corporate tourists. The convenient location of Noor Mahal too makes it attractive for a section of high-profile leisure tourists commuting from Delhi to Chandigarh or Shimla, and vice-versa.

Then take the case of Sinclairs Burdwan, which is located in the small town of Burdwan. But Burdwan is located very near to the industrial towns of Asansol and Durgapur and only 90 km from Kolkata. It is conveniently located at a 2 hour drive from the Kolkata airport.

Sinclairs Burdwan is an upscale tourist resort offering fine accommodation, club and banquet facilities. Spread over four acres, the resort can come across as getaway for families looking for a break from stressful city life. The hotel can also easily get business travellers commuting from Kolkata to Durgapur or Asansol.

“Besides through business travel, hotels and resorts located in tier-II & tier-III cities of the country can garner significant revenues through increased buoyancy in our food & beverage spend, weddings, and social events. Moreover, many of our tier-II and tier-III cities are closely located to UNESCO Heritage Sites and religious destinations. As our Incredible India campaign is driving more inbound and domestic tourists, these cities will continue to cash in on the business opportunities,” pointed out Saxena.

Sahdev Mehta, General Manager. Hilton Garden Inn Gurgaon Baani Square, believes that important factors behind the growth in investments of hotel projects in tier-II and tier-III cities of India are the low land cost hence low development cost in these cities, as compared to that of metros in India, and the growing expendable income of the middle class in these cities.

“During the past few years, tier-II and tier-III cities of our country have seen a major boom of hotel brands across various segments. Growth of industrialisation in many of these cities of India is one of the major reasons, which led to emergence of this trend. Industrialisation is encouraging, or rather sometimes necessitating, business travellers from across the globe to visit tier-II and tier-III cities of India for their business purposes; thereby resulting in a rise in demand and supply of accommodations of various budgets across these cities,” opined Ajith Nair, DOSM, Novotel Imagica Khopoli.

Nair believes that with economical real estate and skilled labour force, many of the tier-II and tier-III cities of India reflect a potential market for hospitality industry players; a market, which he believes, needs to be further explored.

“In small cities of India there is now considerable disposable income but they have few outlets to channelise those disposable incomes. And hence there is a huge untapped opportunity for lifestyle elements to thrive in many of these cities,” opined Aditya Malla, GM, Doubletree by Hilton Pune-Chinchwad. Thus by the same logic, there is a potential for the growth of tourism and hospitality in these cities and towns, which many hospitality players are exploiting.

Ramendra Pratap Singh feels that the branded hospitality properties reflect great aspirational value for people in tier-II and tier-III cities of India.

“Many of the tier-II and tier-III cities of the country have emerged as the hub of business activity and the investments from branded hotels have begun to penetrate in to these cities. The major significance these small cities have over larger cities of the country is their economical real estate, affordable labour and service costs,” proffered Amit Kumar, General Manager, Courtyard by Marriott Pune Chakan.

Connectivity and Hygiene Issues

However, many things need to be done to improve the connectivity to the tier-II and tier-III cities of India, which can make them at par with metros in terms of tourism inflows.

The airline connectivity needs to go deeper in India, and road infrastructure and the state of hygiene needs to be improved through the country, for branded hotel chains to better explore the tourism and hospitality potential of tier-II and tier-III cities and towns of India.

Improving of connectivity to north-east destinations deserve special mention in this regard.  Similarly, drastic improvement of cleanliness and hygiene in a globally renowned religious tourism destination like Varanasi is required. Places with great natural beauty and cultural heritage like Darjeeling and Bankura also fare badly in terms of sanitation, which needs to be urgently addressed. 

“Overall, currently, transportation needs to be further improved in and to these cities. Most of our natural landscapes, which are attractive to tourists as well as other key tourist attractions, are located in our tier-II and tier-III cities. But many of these places still lack comprehensive access, which is a deterrent to most travellers,” affirmed Sharma.

Airline connectivity to international destinations can give tier-II and tier-III cities more inbound travellers, which can give a fillip to the hospitality business in these cities. A case in the point in this regard is Amritsar, which has airline connectivity to seven international destinations such as Dubai, Kuala Lumpur, Birmingham, Doha, Singapore, Ashgabat and Tashkent. 

“More and more tier-II and tier-III cities of India should have easier & better air access to the airports of metros in India, and also should have direct connectivity to international locations as well. Improvement of navigation in suitable stretches of major ports and river cities will also provide immense possibilities for opening out a new route for tourists to these cities. The National Highways and Expressways built to connect tourism destinations will revolutionise holiday travel in tier-II, and tier-III cities,” elaborated an enthusiastic Saxena. 

“The Union and the state governments should continue to focus on infrastructure development and maintenance and upkeep of tourist spots in these tier-II and tier-III cities,” maintained Malla.

“The tourism and hospitality revenues in the tier-II and tier-III cities can be improved by better connectivity to these cities. Better connectivity will facilitate people to travel to these cities at nominal cost. Activation of rural and religious tourism in these cities can also increase the inflow of international tourists to these regions,” averred Nair.

Safety Concerns

Safety concerns for the women tourists need to be given even greater priority by our Union and state governments, and also by our tourism and hospitality industry. If hotels opening in tier-II and tier-III cities have separate floors for single women travellers or tailor made special tourism packages for women travellers, they can attract more numbers of women tourists and hence better revenues.

Introduction of Tourist Police   throughout the country is also the need of the hour. It was heartening when KJ Alphons, the Union Minister of State for Electronics and Information Technology, Culture, and Tourism, said in the Rajya Sabha that 14 states had deployed tourist police in one form or the other. These states are Andhra Pradesh, Goa, Karnataka, Kerala, Maharashtra, Delhi, Himachal Pradesh, Rajasthan, Jammu and Kashmir, Uttar Pradesh, Punjab, Madhya Pradesh, Telangana and Odisha. 

Moreover, the promotion of lesser known cities and towns of India with great but lesser known heritage and religious appeal through creative advertising by the Ministry of Tourism can also direct more hospitality investments in these places.

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