The Race to Scale in India’s Non-Metro Markets

India’s hospitality landscape is undergoing a strategic shift as leading hotel chains increasingly move beyond saturated metros to tap the rising potential of tier II-IV cities. Fuelled by improved connectivity, growing business activity and a surge in domestic tourism, these emerging markets are attracting large-scale investments from top brands eager to capture new traveller segments. The result is a vibrant wave of hospitality expansion that is reshaping the country’s lodging map and elevating the quality of stays in smaller cities. VISHVAPREET Singh Cheema, President, Lemon Tree Hotels Ltd., elaborates on this trend.

For several years, India has been considered to be on the cusp of rapid economic growth. The chapters of the India story are powered by improved infrastructure and road connectivity, as well as the second-largest segment of the middle class in the world, who have unprecedented disposable incomes. Rest, rejuvenation and travel for experiences that are off the beaten path feature high on the list of the activities they want to pursue. While families are travelling for leisure, there is a rising segment of business and corporate travellers, and the opportunities for them do not lie solely in major metros.

As such, tier II, III and even IV cities represent a major portion of this potential. The hinterland holds considerable untapped opportunity. Burgeoning incomes, wider internet exposure as well as trips to nearby metros have created an aspirational market. “It is this population that we are looking to cater to,” says Vishvapreet.

Expanding Beyond Metros

More than two decades ago, when Lemon Tree Hotels started as a mid-scale brand, it was the first to attempt to tap this emerging market. “And it is this promise that we continue to try to live up to. As India’s fastest-growing mid-scale and premium hotel chain, we are rapidly expanding in all directions and into cities that can be categorised as tier II, III and IV,” adds Vishvapreet.

The leading hotel chain is looking beyond Delhi and Mumbai. More than 80 percent of its upcoming inventory is in smaller towns and cities. It has already marked its presence in Dapoli, Maharashtra with two hotels and has signed properties in Bharuch (Gujarat), Chittorgarh (Rajasthan), Rudrapur (Uttarakhand), Pali (Maharashtra) and Moga (Punjab), to name a few. It is also looking to mark Mahoba in Uttar Pradesh.

Lemon Tree Hotels is focusing on the mid-market branded segment and signing new franchises under the ‘Keys Select’ brand, with an ambitious target of over 30,000 rooms by 2030. For instance, Lemon Tree Hotel, Chandausi, which opened in a town that lies midway between Moradabad and Sambhal, is the first branded hotel in the region. With seven large open and enclosed banquet spaces, it has quickly become a much sought-after place. Any city with a population of over 4 lakh, combined with rising incomes and a specialised local industry, has immense potential to become the next hotspot.

Offering Eco-Smart & Experiential Stays

For chains expanding into smaller cities, delivering elevated, eco-smart and experiential stays is vital. “At our different properties, depending upon the location, we offer local experiences that are immensely popular with our guests. At Aurika, Udaipur, there are options for private dining in a ‘baoli’ or attending a masterclass with a chef. At Lemon Tree Wildlife Resort, Kanha, there is the option of a bush dinner, safari and a sundowner. Lemon Tree Premier, Corbett, has introduced cycling and village excursions. Experiences need to be relevant and in sync with the location,” informs Vishvapreet.

Sustainability is a crucial factor when expanding into non-metro destinations in order to avoid damaging these ecosystems and Lemon Tree Hotels understands this well. It has been opting for water recycling, green building practices where feasible, serving half-glass water portions and changing linen every three days at its properties. Every aspect has been taken into account at Aurika, Mumbai to reduce the carbon footprint, especially since it has a huge property with 669 rooms. “It is interesting to see our guests responding so positively as our intentions find a resonance with them,” Vishvapreet adds.

Keeping Track of Market Pulse

Expansion into non-metro markets is driven by micro-market indicators such as business activity, connectivity and tourism potential, which allow hotels to be sized appropriately and maintain sustainable performance even at conservative occupancies. Once operational, realtime demand tracking and smart inventory controls ensure pricing, distribution channels and pacing are managed without flooding the market.

As early movers in many cities, brands such as Lemon Tree often become benchmarks for organised hospitality. Additional branded entrants tend to expand awareness and aspiration, growing the overall demand pool rather than diluting it. With strong loyalty programmes, distribution strength and consistent service delivery, these hotels are confident of capturing repeat business and long-term market leadership as these cities mature

Tapping Pilgrim & Wedding Tourism

Spiritual tourism and pilgrimages are one of the fastestgrowing segments in India. The improved infrastructure, government initiatives like the PRASAD scheme, enhanced connectivity, as in the case of Char Dham, as well as a surge in demand, especially since the inauguration of the Ram Mandir, have collectively contributed to the rise.

According to a recent report by MakeMyTrip, accommodation bookings across 56 pilgrimage destinations grew by 19 percent in the last financial year, exceeding 25 percent growth in 34 destinations. This trend influences how and where hotel chains choose to expand. Lemon Tree Hotels has three hotels each coming up in Ayodhya and Varanasi, one each in Bodh Gaya, Pushkar and Shirdi and two in Vrindavan.

Destination weddings, too, are a growing market. Surveys by bodies like Skyscanner and WeddingWire show that an overwhelming 85 percent Indians either plan to or have already celebrated a destination wedding in the current financial year. “Many of our upcoming hotels are designed to host intimate destination weddings,” Vishvapreet points out.

Sankhwas Garh, a Lemon Tree resort in Rajasthan, will be a heritage property with 51 rooms, a restaurant, bar, banqueting hall and swimming pool, making it perfect for intimate weddings. Similarly, Aurika, Udaipur, which is designed like a modern-day fort, provides a regal setting for contemporary couples. Its Ekaara and Ekaara Terrace banquets set against the backdrop of the ‘City of Lakes’, making them elegant venues for exclusive weddings.

Building Local, Inclusive Workforce

Expansion into smaller cities also brings operational challenges. “The hospitality sector has long grappled with a talent crunch, driven largely by the demanding nature of operational roles and long working hours. This challenge is magnified in smaller cities, where the pool of trained professionals is limited and candidates from larger markets are often hesitant to relocate,” Vishvapreet admits.

Lemon Tree has turned this into an opportunity by widening its hiring pool beyond hotel management graduates. A significant proportion of staff is recruited from economically and socially marginalised sections of the society. A robust in-house learning and development framework equips them with the skills and confidence to excel. “This approach not only expands the talent pool but also creates meaningful employment pathways. Most importantly, it ensures that guests across all Lemon Tree Hotels, from major metros to tier IV destinations, receive consistently warm, sincere and efficient service,” Vishvapreet says.

Scaling Responsibly

Lemon Tree Hotels intends to expand its footprint to every city across the country. “We already have 100+ hotels coming up in the next five years, and the numbers will multiply, given how rapidly we are onboarding new partners,” Vishvapreet shares. With better exposure and service quality, the expectations will naturally keep looking up, and the assumption of laidback attitude of small towns will erode rapidly.

This also means taking care of oversupply and cannibalisation. Lemon Tree Hotels adopts a disciplined, dataled approach to entering smaller cities to ensure supply does not outpace demand.