Improving domestic leisure travel has prompted hotel chains to expand room inventory over the past few years. A major noticeable trend is that hotel companies are expanding 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 the opening of new hotels in the mid-market and upscale segments.
Travel trends such as weekend getaways, road trips, staycations (vacation close to home), workation (leisure trip in which work is an add-on) and bleisure (a business trip which gets extended to a leisure trip) have boosted leisure travel in the past two years. This is also reflected in the rising trend in air travel, which 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.