Smaller Cities, Big Potential

India is experiencing a growth trajectory fuelled by rapid urbanisation and infrastructure development. Such landscape makes hoteliers invest in Tier-II and Tier-III, ensuring a uniform growth. Hospitality Talk, gets in conversation with spokespersons of some prominent hotel brands to know about the evolution of these cities.

- Anupriya Bishnoi

The internet has brought the world closer, made places accessible and increased the capacity of tourism to a large extent. Most Tier-II and III cities have reasonably good infrastructure and in many states the government is subsiding costs for investors to boost tourism in their respective states.

Investing it right

According to Raj Rana, Chief Executive Officer, South Asia, Carlson Rezidor Hotel Group, “India has historically been a country with relatively lower hotel supply. In the mid-2000s, there was tremendous hotel activity in the most Tier-I markets. Today land costs in Tier-I markets supplemented with an increasingly competitive market, have resulted in longer return tenures. In contrast, feasibility studies justify a quicker return on investment in Tier-II and III cities, due to lower land cost and competition. Improved connectivity and infrastructure are creating demand in these cities which allow investors to meet their investment criteria.”

AccorHotels sees tremendous developmental potential in the Tier-II and III cities and views them as growth engines of the future. Jean-Michel Cassé, Senior Vice President, Operations, AccorHotels, India says, “We believe that these cities represent largely untapped assets due to availability and demand gap. Favourable factors of production and reasonable land costs are other factors prompting hospitality players to expand their presence in these cities. With efforts to ease off pressure on the metro cities due to space and time constraints with underdeveloped infrastructures, growth in Tier-II and III cities reflect a positive change for India.”