Corporate Travel Surges in India’s Tier 2 & 3 Cities: A New Era of Business Growth

According to recent reports, the corporate travel market in India’s Tier 2 and 3 cities is booming, growing at an impressive rate of 25-67% year-on-year. This rapid expansion is outpacing the sluggish 2-3% growth seen in major metropolitan centers like Mumbai, Delhi NCR, and Bangalore. The major industries driving corporate travel expenses are IT services, BFSI, engineering, aviation, oil and gas, pharma, FMCG, and automobiles.

The shift in business travel to Tier 2 and 3 cities is largely driven by concentrated investments, especially in the manufacturing sector, which contributes around 17% to the latest GDP. Cities such as Ahmedabad, Vadodara, Bhubaneswar, and Lucknow are emerging as key hubs for business travel.

Automotive & Auto Components

Investments in the automotive and auto components sector exceed ₹85,000 crores, employing approximately 750,000 people across multiple manufacturing clusters. Key cities in this sector include:

- Vijayawada (Andhra Pradesh) : Home to companies like Isuzu Motors India, Hero MotorCorp, Ashok Leyland, and AVERA Energy, with significant auto component suppliers in nearby Sri City and Satyavedu. - Lucknow (Uttar Pradesh) : Hosts major players like Tata Motors commercial vehicle division, Honda Cars India, New Holland Agriculture, and Yamaha Motors. - Coimbatore (Tamil Nadu) : Known as the “Manchester of South India,” it is a hub for TAFE Tractors, automotive component manufacturers, and engineering firms. - Surat (Gujarat) : While famous for textiles and gems, it is also emerging as an automotive and auto-component hub.

The presence of these manufacturers drives continuous corporate travel for executive rotations, supplier audits, quality control visits, and senior management coordination.

Steel & Heavy Manufacturing

Jaipur, in Odisha, stands out as a significant investment destination for corporate travel in Tier 2 India. Tata Steel’s Kalingangar expansion alone represents ₹27,000 crore in investment, expanding capacity from 3 MTPA to 8 MTPA and creating 34,000+ new jobs. The acquisition of Neelachal Ispat Nigam Ltd (NINL) by Tata Steel for ₹12,000 crores further consolidates industrial activities in the region.

FMCG & Retail

The fast-moving consumer goods (FMCG) sector is another major driver of corporate travel to Tier 2 cities, primarily due to the necessity of managing wide distribution networks, trade meetings, and supply chain coordination. Key cities include:

- Indore (Madhya Pradesh) : The main marketplace for Central India, hosting regional offices of ITC, Hindustan Unilever, and other FMCG brands. - Surat (Gujarat) : A hub for gems and jewellery trading, textiles, and chemical manufacturing, requiring frequent business meetings and supply chain management.

The consumption of FMCG in Tier 2 and Tier 3 cities accounts for 36% of the total in India and is predicted to reach 45% by 2025.

Pharmaceutical & Healthcare

The pharmaceutical and healthcare sectors are also shifting their operational bases to cities like Coimbatore, Visakhapatnam, and Chandigarh. This shift increases the need for travel for R&D coordination, manufacturing operations, and regulatory purposes. Visakhapatnam, in particular, is attracting pharmaceutical companies with promises of lower operating costs and a strategic location.

IT & Information Technology Services

New IT hubs in Coimbatore, Bhubaneswar, Kochi, Chandigarh, and Guwahati are significantly impacting corporate travel demand. For instance:

- Coimbatore : Rapid growth in tech parks and startup ecosystems has turned it into a secondary IT hub, creating demand for travel related to client meetings, project execution, and training programs. - Bhubaneswar : Recognized as an IT service center with developing Global Capability Centers (GCCs), leading to a projected growth in GCC demographics of 30-40% demand in Tier 2 cities.

The Hotel & Infrastructure Boom

A robust hospitality infrastructure is crucial for the growth of corporate travel. Investors in the hospitality sector are capitalizing on this opportunity by upgrading their locations in Tier 2 cities. For example:

- Indore : Four major hospitality conglomerates are investing more than ₹400 crore to expand hotel inventory from 8,500 rooms to approximately 10,000 rooms by 2026, targeting the growing MICE (Meetings, Incentives, Conferences, and Exhibitions) demand. - Madhya Pradesh : The state is receiving ₹4,468 crore in investment in tourism and hospitality, spread over cities like Indore, Bhopal, Gwalior, and Jabalpur, focusing on luxury hotels, conference centers, and business-ready properties.

Cities like Jaipur, Kochi, Lucknow, Mysuru, Coimbatore, and Bhubaneswar are also witnessing rapid expansion in the hospitality sector due to better connectivity, lower land acquisition costs, and increasing demand for both corporate and leisure travel.

Smart Move from Travel Agencies

Travel agencies are also adapting to this shift by focusing on Tier 2 cities:

- Yatra’s B2B Corporate Focus : Yatra is targeting SME and mid-market corporate clients in Tier-2 cities. In Q2 FY26, the firm welcomed 34 new corporate clients with an annual billing potential of ₹261 crores. The company’s strategy is based on the realization that small and medium enterprises (which account for 30% of the business travel market) are increasingly being established or operating in non-metro areas. - MakeMyTrip’s Multi-City Strategy : The myBiz platform of MakeMyTrip is providing corporate travel solutions in several Tier-2 cities, targeting both the leisure and business travel markets. - Thomas Cook’s Regional Positioning : Thomas Cook India lists Mysore, Mangalore, and Madurai in the South; Chandigarh, Lucknow, and Jaipur in the North; Guwahati, Indore, and Bhubaneswar in East and Central India; and Nagpur and Rajkot in the West as the main regional corporate travel markets.

Conclusion

The corporate travel landscape in India is being fundamentally reshaped by economic decentralization, manufacturing diversification, and infrastructure development. Cities like Indore, Jaipur, Lucknow, Surat, Vijayawada, Visakhapatnam, and Coimbatore are transitioning from secondary to primary growth engines, driving a new era of business growth in Tier 2 and 3 cities.