As corporate India attempts to figure out Donald Trump’s latest tariff salvo, the Indian meeting industry is on a quiet mission to reach out to more cities than before. As Indian villages and small towns grapple with urbanisation issues, branded hotels make their way to target this growth.
What has stood out is an industry that was notorious for having underperformed over the years. Now is adding more inventory than ever before. With the new entrants primarily from the real estate domain, who have found love to create wealth, go multi-utility and don the hotel owner hat and hope to play the ultimate host! While major cities continue to hog the headlines in terms of inventory being added, the tier-2 & tier-3 cities are the ones grabbing the action! Realty consultancy JLL India indicates that over the past two years, top-notch hotel chains, domestic and international, are mushrooming in a surprising new segment: Tier 2 and Tier 3 cities.
A recent study by JLL revealed that “nearly 43% of planned hotel projects are being developed in these smaller markets. In the last fiscal year, around 67% of all new hotel openings were in Tier-2 and Tier-3 cities, a number that is expected to increase to 75% next year.”
Hotelivate, one of India’s leading consultancies, said in a report that approximately 50 percent of the supply pipeline of rooms will come up in tier 2 and 3 cities such as Lucknow (1,200), Agra (1,200), Kochi (1,100), Udaipur (1,100), Dehradun (900), Vijayawada (900), Varanasi (700), Guwahati (700), and Gorakhpur (400).
The realty boom continues to add to the semi-urban growth story in India. According to JLL, the retail sector in Tier II and III cities is experiencing a surge in new retail supply, with 25 million sq. ft of retail developments expected to come on stream in the next five years.
One of the key drivers is the UDAAN (‘Ude Desh Ka Aam Nagrik’) scheme offered by the Government of India, where tickets are being subsidised at reactivated airports and a growing economic spotlight. 235 routes cleared by the Aviation Ministry cover 16 unserved and 17 underserved airports and six water aerodromes. There are 50 airports that are already being served and will be connected to these underserved and unserved airports. The winner of the bid gets a 3-year exclusive right to operate flights on the route. The fare for half the seats in a flight is capped at ₹2,500 for an hour of a plane journey of approximately 500 km and a 30-minute helicopter journey. The selected airline provides 50% of the flight capacity, with a minimum of 9 and a maximum of 40 seats for planes and a minimum of 5 and a maximum of 13 seats for helicopters.
With increased purchasing power, the advent of bigger brands into tier-2 and tier-3 cities seems a natural market acquisition process. As more event management companies take flight in smaller cities, the realm of booking technology for events has also exploded.
When smaller cities vie for action, meeting spaces continue to add opportunities in terms of weddings and social gatherings, corporate sales conferences, product launches, etc. The country simply loves to celebrate! With made-to-order occasions created out of thin air or six-month-long meticulously designed weddings, hotels in India have never had it this good. The Indian hospitality industry’s unique revenue trait, where food & beverage contribute more to the revenue kitty than the segment is credited. The meetings industry might seldom be challenged, with the discerning Indian finding more occasions to celebrate! Events to celebrate anniversaries, birthdays, kitty parties, family and friends’ get-togethers, naming ceremonies, and, of course, the big fat Indian wedding all bring cheer to the table!
Trying to adapt a hotel management model, where the focus is primarily on room sales, will spell disaster for the owner-driven hotels in the country. Speaking about the new era hotels that seem to be flooding the market with imported standards, especially from Europe and the US, which seem more interested in getting to the magic number of 500 properties in India than in creating the right variation of their product to suit the Indian market. Service and amenity standards currently being enforced in the name of global parity are absurd. There have been investments made in crores to create a profitable entity, and they have left Indian hoteliers in the lurch, not necessarily due to the economic situations we endure.
How do you explain to a prospective client, who wishes to book a hotel for his residential conference or wants to host his big fat Indian wedding, that he can take his room business but has no venue to host the banquet? Indians, by trait, need any excuse to get a gathering on to host a lunch or dinner! The scorn for food and beverage sales is not justified when, in India, sometimes F&B sales constitute up to 50% of revenue. It should do well for hotels to broaden their client profile. Every hotel in the three- to four-star range should have meeting spaces of a minimum of 3000 square feet.
The idiom that India lives in the villages is out of place when the villages vie to become towns and towns aspire to be recognised as cities! The progression seems natural, and the need for quality hospitality and event spaces is aspirational, to say the least! As India surges to be the world’s third biggest economy, India’s tier 2, 3, and now 4 graded cities will have to deliver, and with it comes the requisite infrastructure and optimism for a new resurgent India.