Wednesday, February 29, 2012: 04:20:42 PM

TJCD Guest Column

Non-metro cities driving hotel construction in India, says Rajneesh Kumar of Courtyard by Marriott

With metros stagnating, hoteliers are focusing on non-metro cities to meet growing demand for hotel rooms in India; basic advantages of hotels in non-metro cities include lower land prices and lower operating costs

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The metro cities of India have long been saturated, both in terms of space and demand for new hotels. This has prompted hoteliers and developers to foray into non-metro cities, tier II and III cities in particular, across India. The emergence of corporate houses in these non-metro cities has further driven the demand for hotel constriction here.

At present, hoteliers are investing in cities like Jaipur, Chandigarh and Kochi, among others. There has been a growth of both mid-market and luxury hotels in these non-metro cities.
Government policies have also significantly contributed to the development of hotels in tier I and II cities. For instance: The approval for special economic zones (SEZs) in Madhya Pradesh, Gujarat, West Bengal and other states has led to inflow of businesses in these states, thereby increasing the demand for hotel rooms. Industrial development has improved infrastructure and increased the travel network, consequently making these non-metro cities more accessible and emerging hotspots for hoteliers.
Setting up hotels in tier II and III cities has its advantages. The most basic benefits are lower land prices and lower operating costs. Consider this: Since the Indian government practices third degree price discrimination, electricity is cheaper in Bhopal compared to Gurgaon.
The non-metro cities also offer the diversity of tourism, which includes medical tourism, spa tourism, religious tourism, adventure tourism and business tourism. Goa and its adjoining suburbs are currently the hot favourite for medical conferences and advertising agencies. This has triggered the demand for hotel rooms in these areas.
There are many organisations that engage in outbound retreats to locations such as Jim Corbett National Park in Uttarakhand. This has necessitated the demand for mid-range and luxury hotels and even boutique resorts in these areas.  
Varanasi and Gaya have a sacred place in the heart of every Buddhist pilgrim and we see a large inflow of international tourists to these holy cities. The segmentation of these tourists is fairly diverse and budget hotels do not suffice the requirements. Hence, leading hotel chains like Courtyard by Marriott are interested in expanding reach in these non-metro cities.
Leh is the ‘destination to be’ for adventure tourists. However, we must understand that these tourists may not always want to rough it out in terms of accommodation and this should be a sign to establish international hotel chains in a town like Leh.
Changing consumer behaviour has seen an increase in domestic tourists indulging in mini retreats for weekends and public holidays. For instance, Jaipur and Chandigarh have emerged as ideal weekend retreats for many Delhites. A five-star hotel in a small town is a bonus for the hospitality industry and will only encourage more uptown tourists to visit these cities.
Hotel brands appreciate the fact that the action is at the bottom of the pyramid as well. The growth opportunities are comparatively higher, since metros stagnate after a certain point. Tier II and III cities cannot be ignored as they can contribute largely in meeting the ever-rising demand for hotel rooms in India.
Rajneesh Kumar, head (Food & Beverage) at Courtyard by Marriott, Gurgaon, a well-known hotel located in the heart of Gurgaon offering guests with best-in-class amenities and exclusive dining options

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