A fourth of rooms at risk if Budget doesn't help sector: Hotel bodies

Urge infra status for hotels worth over Rs 25 crore, lower GST and income tax rates

Close to a fourth of the total room inventory in India’s hospitality sector will face survival issues if the industry, one of the worst hit by the pandemic, is not lent a helping hand in the upcoming budget, said KB. Kachru, VP, Hotel Association of India & Chairman Emeritus & Principal Advisor, South Asia, Radisson Hotel Group. India has a little over 140,000 rooms in the branded segment.

As per association’s estimates, four of every ten hotels in the country are on the brink of closure. Even as the sector limps back to normalcy, it will take two to three years to bounce back to pre-Covid levels, says Kachru.

Nationwide average daily rates (ADRs) are showing month-on-month improvement, primarily driven by the steady increase in demand from domestic leisure travellers, but occupancy and ADRs remain highly depressed in hotels in business locations. Bengaluru and Pune continued to post the lowest occupancy (less than 30 per cent) in the country last November, according to a HVS Anarock report.

“Inbound travel is unlikely to resume anytime soon, the hotels are solely dependent on domestic travel. Therefore, the government should extend all possible support to help us tap into the demand,” he said. The fact that in the pre-Covid phase, India had 10 million inbound tourists but was sending 26 million outside the country, shows the potential. “Most of these high-spending outbound travellers are vacationing within the country. So we have a ready market,” said Kachru.

 

Agrees, Nakul Anand, chairman, FAITH (Federation of Associations in Indian Tourism and Hospitality) “Tourism encompasses multiple ministries and takes place in and within states. It thus requires a coordinated approach across all the ministries at the Central Government level and between Centre and states,” said Anand, emphasising that the National Tourism Council needs to be an empowered legislative body that will enable fast-tracking of centre-state level tourism matters and will create a One-India-One-Tourism approach leveraging and utilising full synergies of India’s tourism potential across all the states.

Among a host of other things including reduction in GST rates and income tax rates, domestic travel tax credit, the industry associations’ pre-budget recommendations to the government includes infrastructure status for the hospitality sector.

“It is recommended to declare hotels of above Rs 25 crore, capex (excluding land) as infrastructure,” says HAI in its pre-budget note. According to Anand, hotels across the country require to be declared as an infrastructure sector so that long term funds are accessible at suitable interest rates to attract private capital hospitality, to create all India jobs and build quality accommodation supply. He also stresses on the need to incentivise corporates to host events in India to boost the MICE (meetings, incentives, conferences & events) “For that we need to offer a 200 per cent weighted income tax expense benefit to Indian companies which are undertaking mice events in India.”

Budget wish-list

. Infrastructure status

. Rationalisation of tax rates

. Power tariffs at industry rates

. Domestic travel tax credit