Rising hospitality trends: Tier-3 cities in India see surge in hotel openings

New Delhi: Smaller towns and cities across India are emerging as the latest hospitality hotbed with a sharp rise in new hotel signings.

Data shared by real estate consultancy JLL with ET showed about 13,274 rooms were signed in Tier III locations last year, up from 7,267 in 2023.

“The impact of economic growth is witnessed across the length and breadth of the country. Unprecedented growth of travel, backed by business activity as well as leisure travel, including pilgrimage travel, has resulted in a massive upswing in demand,” said Jaideep Dang, managing director, Hotels and Hospitality Group, at JLL India.


“We have been busy doing project feasibilities followed by project development in many Tier II and III towns and cities. Higher lifestyle aspirations have resulted in higher spends on F&B, social events and the wedding market in these locations,” he added.

Several factors are fuelling this growth, said Nikhil Sharma, MD, and COO, South Asia, at Radisson Hotel Group. Radisson has signed or opened hotels in new locations such as Khopoli (Maharashtra), Saputara (Gujarat) and Yavatmal (Maharashtra) in the past year.

"Staycations and leisure travel to offbeat destinations are also on the rise, while improved infrastructure and government initiatives are making travel more accessible. Many of these locations are also emerging as commercial and industrial hubs, attracting business travellers," said Sharma.

India’s hospitality sector is undergoing a ‘dynamic’ shift, with Tier III and IV locations emerging as the next growth frontiers, said Nandivardhan Jain, founder and CEO of Noesis Capital Advisors, “At Noesis, we have been instrumental in this transformation, and some key projects facilitated by us last year include the 144- keys Holiday Inn signed in Ujjain, the 200-keys Le Meridien signed in Bhopal, the 100-keys Regenta Resort signed in Dapoli, the 115-keys Radisson Resort signed in Khopoli, and the 165-keys Novotel signed in Guruvayur,” he said.

Deepak Jain, founder of MayFair Consultants said his company has signed mandates for top international brands for opening a resort at Kumarhatti in Himachal Pradesh and a hotel at Tauru in Haryana.

Pangala in Karnataka and Tekkumuri in Kerala were among the top 10 most-searched destinations for accommodations in 2024 on Booking.com, according to Santosh Kumar, country manager for India, Sri Lanka, Maldives and Indonesia at the online travel agency. “The hospitality industry in India is undergoing a rapid expansion moving beyond Tier I cities to Tier II and III, especially those renowned for their religious significance,” he said.

“This growth is fuelled by a confluence of factors, including a surge in domestic travel, a burgeoning interest in religious tourism, evolving traveller expectations and government initiatives promoting tourism in lesser-known destinations,” he said.

Devendra Parulekar, founder of SaffronStays, noted infrastructure development leading to more drivable destinations as the biggest driver for the hospitality industry’s expansion. “Till a few years ago, people had not even heard of destinations such as Anjarle. We have three homes in Anjarle and are doing 90% occupancy with super premium rates all through the year,” he added. SaffronStays is looking to close 2025 with 350 villas, touching the 500-villa mark next year.