Hotels expand presence in tier-II cities amid booming leisure travel

ET Intelligence Group: Improving domestic leisure travel has prompted hotel chains to expand room inventory over the past few years. A major trend is that such expansion is taking place in tier-II and smaller towns faster than the metro regions.

The share of hotel rooms in the tier-II and tier-III cities increased to 38% of the total inventory at the end of 2022 from 33% four years ago according to a recent HVS-Anarock report. The share of hotel rooms in metros reduced to 19% from 30% during the period.

Cities such as Agra, Haridwar, Manali, McLeod Ganj, Kasauli, Katra, Mahabaleshwar, Puri, Pushkar, Rishikesh, Tirupati and Vrindavan reported opening of new hotels in the mid-market and upscale segments.

Travel trends such as weekend getaways, road trips, staycation (vacation close to home), workation (leisure trip in which work is an add-on) and Bleisure (business trip which gets extended to leisure trip) have boosted leisure travel in the past two years. This is also reflected in the rising trend in air travel. Air travel grew by 60% year-on-year in FY23.

The rising travel to smaller cities is likely to benefit listed hotels such as Indian Hotels and Lemon Tree Hotels, which have a fairly strong presence in mid-market and upscale segments.