Expanding Hotel Boom in India’s Smaller Cities

As travelers in India increasingly seek out lesser-known domestic destinations, major hotel brands are seizing the opportunity to expand into the country’s hinterlands. The hospitality industry in India is experiencing rapid growth, with data from real estate services firm JLL showing significant expansion in both tier 2 and tier 3 cities.

During 2023, a total of 131 hotels opened across India, with an additional 182 properties signed. These openings represent over 8,200 rooms, with more than 16,000 in the pipeline. Notably, the majority of this growth occurred outside of tier 1 cities, with 217 new hotels in tier 2 cities and 176 hotels in tier 3 towns, compared to just 61 in tier 1 cities.

Recent hotel openings include luxury properties like Taj The Trees in Mumbai and Moxy Bengaluru Airport Prestige Tech Cloud, as well as upscale options like InterContinental Jaipur Tonk Road and Radisson Blu Pune Hinjawadi. Smaller destinations also saw new openings, such as Ginger in Durgapur and Gorbandh Palace in Jaisalmer.

This expansion into smaller markets is driven by infrastructure development and federal schemes promoting domestic tourism. Brands like Marriott International and IHG Hotels and Resorts are strategically expanding into tier 2 and 3 cities to cater to evolving consumer preferences.

The growth in remote regions is further fueled by religious tourism and increased infrastructure focus, particularly in Northeastern states. Midscale hotels represent the most active category, forming over 55% of newly opened and signed hotels in 2023.

As demand for branded accommodations grows in emerging markets, hotel groups like Radisson Hotel Group and Indian Hotels Company (IHCL) are tailoring their offerings to the mass market. IHCL, for example, is developing a full-service brand specifically for tier 2 and 3 cities.

The hospitality boom in India’s smaller cities will be a focal point at the upcoming Skift India Summit in Delhi-NCR from March 19-20, shedding light on the industry’s growth prospects and opportunities.