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International Hotel Chains Push Into Smaller Indian Cities

A staff member of Vivanta By Taj, a Tata group hotel, walks past the swimming pool at a luxury hotel in Bangalore, India. People in cities like Jaipur want international experiences similar to the kind available in big cities. (2009 File)
A staff member of Vivanta By Taj, a Tata group hotel, walks past the swimming pool at a luxury hotel in Bangalore, India. People in cities like Jaipur want international experiences similar to the kind available in big cities. (2009 File)

As domestic tourism booms in India and a growing economy creates wealth beyond the country’s urban hubs, international hotel groups are pushing into smaller towns and cities. 

Luxury hotel chains in Jaipur

As the winter chill recedes and spring sets in, three children play poolside at the Marriott Hotel in Jaipur city on a Sunday morning under the supervision of their father, who works in the city.

The hotel opened seven months ago in this northern, historic center of forts and palaces.  Jaipur has long been popular with foreign tourists and is home to many heritage hotels.

But it is not international visitors that the Jaipur Marriott is targeting.  Rather, it is domestic customers like Sachin Sharma, who want to relax over the weekend with their family in a modern, luxury hotel.

“It’s a different kind of experience.  The five star hotels, their way of treating people and their cuisines are different from (what) Jaipur used to have in their heritage kind of hotels," Sharma said. "Here we can find every single cuisine from different, different countries.”

As India’s economy booms, a number of international hotel chains such as Four Seasons Hotels and Resorts, Fairmont Hotels, and Park Hyatt Hotels and J.W. Marriott have been expanding in the country.  But they are not just looking at the main urban hubs of New Delhi, Mumbai and Bangalore.

New markets in Tier 2 cities

They are also opening properties in what is known as Tier 2 cities - fast growing urban centers with a population of less than five million.  Some of them, including Japiur, have been identified as India’s new boomtowns.

The Jaipur Marriott's general manager, Pankaj Birla, says they want to fill the gap for contemporary, five star hotels in these cities, both for residents and domestic tourists.

“I would say almost 85 to 90 percent of our business is on domestic demand.  And what you are seeing is Tier 2 cities have more propensity to spend and the wealth that is being created in India is getting down to Tier 2 cities,” Birla stated.

The luxury hotel has hosted conferences organized by companies and professionals, and weddings held by rich Indians. Its coffee shop and weekend buffets are popular with residents.

India's tourism, new frontiers

And it is tapping into a boom in domestic tourism.  As new airports and highways are built, Indians are traveling inside the country more than ever.  The number of domestic tourist visits nearly doubled in three years to about 740 million in 2010.  The number of foreign tourists is about six million, and is growing far more modestly.

The president of the Federation of Hotel and Restaurant Associations of India, Kamlesh Barot, says that has prompted luxury hotel chains to focus on domestic tourists.

“The budgets which are sanctioned for corporate travel within the country has shot up.  But also the family crowd spending power that was available yesterday to only the top affluent class has now percolated down to the upper and the upper middle class," Barot said. "Also, the effects of the recession abroad…. people who were coming from abroad with a lot of spending power, has actually declined because of the recession.”

Barot calls it a “paradigm shift” from dollar spending to rupee spending.

Purnendu Kumar of the Technopak consultancy says as aspirations rise in smaller towns, businesses such as retail chains and hotels are targeting them to tap into their growing wealth.

“Everybody has access to the latest consumption trends, what is happening in larger cities, even globally, everybody is aware of that, so people now with more money in the pocket would definitely like to behave like the people whom they idolize," Kumar added. "Whom they aspire to be.”

General Manager Birla, who comes to the Jaipur Marriott after working in Germany and the United States, has noticed a huge change since the time he left India nearly 20 years ago.  He says people in cities like Jaipur want international experiences, of the kind available in big cities.

“People in Jaipur used to always travel to Delhi to eat a good pizza, a good teppanyaki, a good sushi, a great pasta, now they have it their backyard,” Birla noted.

Retail consultants say India’s smaller towns are emerging as new frontiers for investments and businesses in a country where the economic boom has been fueled largely by domestic demand.

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