The hospitality industry has started to realize the rising potential of establishing hotels in smaller cities. The realization was catalyzed during the pandemic when the hotels in these cities were more resilient and bounced back much faster than the ones in big cities.

The increase in demand for hotels in small cities can be attributed to various factors. Better road infrastructure & new airports have improved accessibility, while industrialization & the emergence of IT hubs have encouraged business travel. Weddings, Religious tourism, conferences, & events such as G20 summits have also contributed to the growing demand for hotels in smaller cities.

The long list of benefits from setting up hotels in tier 2 and 3 cities isn’t lost on the big players in the Hotel chain business. The land is cheaper, competition is low and even non-existent at times, and the marketing is also easier as word of mouth spreads faster in smaller towns. The big hotel chains & their seemingly luxurious aspects are usually perceived as synonymous with big cities, so their presence in smaller cities is welcomed with pride and excitement. These hotels can also bring numerous benefits to the city by promoting tourism & providing a significant boost to the local economy.

However, there are potential drawbacks too, as they may pose a threat to the success of local and heritage hotels that have a deeper connection and sensitivity to the city's culture and traditions.

According to a survey conducted in 2022, there has been a notable change in hotel supply, with approximately 43% of the planned pipeline being directed toward tier 2 and 3 markets. Radisson Hotels has 30% of its Indian portfolio in tier 2 and 3 cities. ‘JLL’, a company that works in the hospitality sector had 67% of keys opened in tier 2 and 3 cities last year, and 75% of fresh projects already planned for this year. Some of this inventory would also be conversions of unbranded hotels into brand-managed & franchised hotels.
After the pandemic, people are getting more interested in exploring the hidden beauty of small cities in India.

Are there any big hotel chains planning to branch out in your city?