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Tourism & Aurangabad: Opportunity in Waiting

by May 28, 2019Market Snapshots

A urangabad, along with the districts of Parbhani, Nanded, Bhir and Osmanabad, comprise the Marathwada region in the western Indian state of Maharashtra. The city is well known for its historical monuments, which include world heritage sites like Ajanta and Ellora Caves, Aurangabad Caves, Pithalkhora Caves, Paithan, Daulatabad Fort, and the Bibi-Ka-Maqbara. Recently, the city has been gaining popularity as an emerging Buddhist destination due to the presence of Buddhist shrines within the Aurangabad Caves and the state government’s efforts to promote them more actively than in the past. Aurangabad, however, has been unable to establish itself as a popular tourist destination due to its poor infrastructure, limited air connectivity, and the overall lacklustre marketing efforts by the state tourism board.

The city has been instead categorised as an industrial development zone, with three SEZs located each at Chikalthana, Shendre and Waluj. Aurangabad is an automobile and ancillary hub, with several major industry players present in the area. Other key industries include pharmaceuticals, manufacturing and beverages. The city is also home to the Institute of Hotel Management, which is affiliated with Taj Hotels Resorts Palaces Safaris. 

Currently, the airport offers limited connectivity, with flights to New Delhi, Mumbai and Hyderabad. It also caters to seasonal charter flights for Haj, which operate briefly from the end of July until early August and then again from late August to early September. However, over the last eight years, both passenger and flight movements have reduced significantly. Moreover, the opening of the airport in Shirdi in 2017, a popular pilgrimage destination, has further contributed to the decline, as Aurangabad airport previously catered to pilgrims travelling to Shirdi, who would typically stay a night in the city before moving along their journey. To quantify the extent of this decline, from 2011/12 to 2018/19, flight and passenger movements have reduced by approximately 28% and 14%, respectively.

The branded hotel market in Aurangabad is small, with the Taj (including Ginger), Lemon Tree, Berggruen, Ambassador, and ITC (WelcomHotel) being the only major hotel companies present in the city, together contributing a little over 400 rooms. As in any Tier II or III market, the bulk of supply here falls in the unbranded/unorganized segment.

With both Commercial and Leisure demand for hotel accommodation in the city, the financial year is generally divided into two seasons. During the first half of the year, hotels cater primarily to Commercial demand, while the second half of the year is tipped towards the leisure traveller. Leisure demand is generated both by domestic and foreign travellers, with the latter being dominated by Buddhist tourists from China, Japan and Thailand. A few European and Scandinavian groups also travel to the city during this time of the year. MICE is another growing segment in Aurangabad, as the city is a popular destination for weddings from the Marathwada region throughout the year. The average length of stay (across segments) is usually about two nights. With the three SEZs located in close proximity to the city, project-based travel is also common, which involves people staying for weeks or months at a time, generating Extended Stay demand for hotels. 

However, the last two to three years have posed a series of challenges for the Aurangabad hotel market. Labour unions, the opening of Shirdi Airport, and several companies shifting to alternate locations due to unfavourable government policies have resulted in a decline in hotel occupancies, while average rates have remained fairly flat. The project-based businesses have also yielded low demand for Food & Beverage in comparison to other markets.

Though major initiatives are being undertaken to promote the city as an industrial destination, efforts to position the city as a tourist destination are still in the nascent stage. As part of the development of the Delhi-Mumbai Industrial Corridor, the government of Maharashtra is developing the first integrated industrial greenfield city, AURIC, spread over 10,000 acres on the outskirts of Aurangabad. The integrated city is slated to be completed by 2022 and is expected to bring in investments to the tune of INR70,000 crores and generate employment for over 300,000 people.

Going forward, Hotelivate believes that improved air connectivity is a critical factor for the growth of Aurangabad as a destination. While every market comes with a series of challenges, hotels in Aurangabad are showing promise, with occupancies breaching the 70 percent threshold very frequently. The mix of Commercial and Leisure demand balances out the negligible seasonality, while the growing MICE demand which is prevalent throughout the year, presents an opportunity for the market to develop hotels across positioning.

For more information, please contact Sanaya Jijina on sanaya@hotelivate.com

 

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