Here’s what the hospitality and tourism industry expecting from the Union Budget 2020
The most awaited budget will be announced on 1st, February 2020
Finance Minister, Nirmala Sitharaman is all set to present before the nation the Union budget for FY 20-21. The most awaited budget will be announced on 1st, February 2020. In the last year, the hotel industry demanded rejig in the tax rate to drive growth in the segment. As a result, the government reduced e-visa fee and also slashed the hotel tax rates— from 28 per cent to 18 per cent for upscale hotels, and from 18 per cent to 12 per cent for mid-scale hotels. Talking about the impact of reduction of e-visa fee on inbound tourism, about 25, 51,211 visitors arrived on e-tourist visa during the first 11 month of calendar year of 2019, as against 20, 61,511 during January-November 2018, registering a growth of 23.8 per cent.
2019 proved to be a mixed year, as hospitality and tourism industry witnessed many challenges, resulting into slow pace growth. However, with the upcoming budget the industry has posted a number of expectations and reforms. Right from employment opportunities to licensing to approvals to gaining Infrastructure status for the industry, the hoteliers and industry experts have outrightly expressed their concerns. Here’s a detailed look at the expectations shared by the fraternity:
Sanjay Sethi, MD & CEO, Chalet Hotels Limited
The Hospitality industry in India has observed a strong and consistent growth over the recent years. The government’s increased interest and efforts to develop India as a preferred tourist destination amongst both domestic as well as international travelers has also given the industry a much-needed boost. To keep this momentum going, the government must consider continuing its focus on the industry since it is one of the major contributors to Foreign Exchange, GDP, Taxes, and most importantly in employment generation. From a business perspective, we need to have designated and uniform industry policies across states so that the operational costs do not differ from state to state. This can be done by bringing hospitality and tourism under the concurrent list. Apart from that, it would be great to have better incentives and provisions for developing hotel real estate. We are a capital intensive business; it takes time to build hotels which means it requires longer periods to service the loans. From Chalet Hotels Ltd. perspective, the GST announcement helped us to focus on expanding the existing portfolio and to strengthen our efforts for fresh investments. The recent most partnership with Hyatt and Marriott is a significant step towards our overall expansion objective.
Sudeep Jain, managing director, InterContinental Hotels Group, SWA
The Union Budget 2019 was favorable for the hospitality industry as the government expressed intent to develop 17 tourist sites into World class tourist destinations, in addition to working towards improving roads and railways infrastructure in the country. GST cut on hotel tariffs was another significant initiative by the government to fuel the growth of the sector. Though, FY 2019-20 has been a challenging year so far, support from the government remains a silver lining for the industry. We are looking expectantly towards the Union Government continuing with the same intent for the sector, and furthermore, help us in easing out the challenges and further fuel growth for the sector.
Vineet Verma, ceo & executive director, Brigade Hospitality Services Limited
We appreciate that with a long list of other priorities at hand; Tourism does not necessarily list among the top three. But, we still hope that a dedicated thrust is given to further promoting tourism in India. It is one of the largest employment generators and has the potential to place India among the top 5 tourism destinations in the world. The spirit of ‘Atithi Devo Bhava’ should be extended to cover the allocation of resources to impart soft skills training at all tourism touch-points. We welcome the move to identify and develop new destinations but it is critical that we also focus on improving connectivity and infrastructure at our existing locations.
Satyen Jain, CEO, Pride Hotels Ltd
This sector has been recognized for the potential to bring foreign currency revenue and create a lot of employment. In the previous year, the government has cut the GST rates. They can do a little more to match rates of 8-10 per cent flat for all hotels whether they charge below or above INR 7500 to match other small countries that are attracting more international tourists than India.
Also obtaining multiple licenses from the project starting to operation is really the biggest difficulty in the hospitality sector. We expect a single-window clearance for all approvals and licensing that makes day-to-day workings complicated. Another expectation would be that the hospitality sector should be granted infrastructure status. Today hotels with less than 200 rooms are not considered as infrastructure. The infrastructure industry gets benefits of concessional rates of interest from banks which are not available to the hotel industry. The current interest rates are very high and long tenures are not available to support the creation of new hotels. A tourism promotion fund should be created to lend hotel loans at 5-6 per cent per annual for a long tenure of 15-18 years. Only if quality hotels come up in all gateway cities and tourist destinations then only the international tourists of India will grow thereby creating employment. Therefore the new hotel which comes up should be given a lower income tax rate at 15 per cent.
Sarbendra Sarkar, founder and managing director, Cygnett Hotels & Resorts
The budget should have incentives for setting up hotels in far-flung areas. India has a lot of foreign and domestic tourist potential beyond the well-known destinations. However, these locations lack basic tourism infrastructure including good hotels. The budget should promote that. I also want the government to extend tax benefits and develop new schemes to promote inbound tourism which was not evident in the previous year.
Ankur Bhatia, managing director, Amadeus, Indian subcontinent
The government should actively consider addressing the two concerns the aviation industry is currently grappling with. First, a hike in foreign direct investment is highly warranted. Other sectors have been allowed to have FDI via automatic route. Considering the fact aviation is at dire straits, FDI should be allowed on case to case basis with riders from the home ministry to come clear on national security concerns. Second, rationalization of ATF taxes, a long-standing demand of the industry, will take the sector out of the quagmire of debts and wafer-thin margins of operations.
Shwetank Singh, vice president, Development and Asset Management, InterGlobe Hotels
One of our major demands as an industry continues to be infrastructure status for hotels with a capital expenditure of INR 50 Crores. Since the GST regime has been established, the cost of construction has gone up by 8-10 per cent as the entire civil structure is treated as an immovable property. We are hoping to get the option to claim input tax credit on GST for this. Also the industry has struggled with variation in bylaws, approvals and licenses, which is why a nodal body is required. This will help us in terms of having a proper time bound escalation mechanism. With these main areas of standardisation we are expecting a positive Union Budget 2020 which keeps the tourism agenda at the core of economic growth.
Pushpendra Bansal, chief operating officer, Lords Hotels and Resorts
Government should strengthen its initiatives to create sustainable hospitality. They should also waive off tourist visa fees for a shorter period to increase outbound tourism. Another important aspect is the lack of adequate infrastructure. The focus should be on developing amenities like building good quality roads, constructing public restrooms on highways and petrol stations that makes road trip safe and women-friendly.
Preety Arora, head - business strategy, Amatra Hotels & Resorts
With the upcoming Union Budget for 2020-21, we are looking forward to various reforms that would enable the industry to grow exponentially. While the government is aggressive across various global markets with the marketing of India as a tourism destination, it is imperative to focus internally and address issues around infrastructure, licensing, approvals and inconsistent regulations that are imposed by various states. We are expecting reforms to be taken around single-window clearance for all operations related to approvals and licensing that makes day to day workings complicated. Further, easing of GST on F&B equivalent to room category could be a great boost for inviting more guests into the hotels.
Mehttab Siddiqui, coo, Radisson Mumbai Andheri MIDC
This year the Union budget will be a progress card based on plans done by various ministries, industries and departments with the outlays in the previous annual budget. The support an individual expects from the respected government authorities are safety and privacy towards tourism sector. Besides, the focus should be laid on employment generation. The real estate sector - the year gone by was marked by a division or contrast between two things that are represented as being opposed or entirely different. It is important to address the sentiment. This can happen if homebuyers decide not to postpone home buying and tourists have the confidence to make a decision for a staycation or relocation.
Travel, Tourism, Hospitality, Food & Beverages industry in India account for more than 10 per cent of the GDP and creates great opportunities for employment and foreign-exchange. However, there should be fund allotment for the infrastructural developments or land allotments for upcoming or existing projects to revamp which give new and improved form, structure and appearance to attract locals as well as international clientele. The objective is to preserve rich cultural heritage and with the support of digital era.
Overlooking the informal/unbranded segment when attempting to determine the size of the Indian hospitality industry will not only be imprudent, but also fail to provide a complete picture of how many lodging/accommodation rooms are actually out there. However, the mentioning of simplifying of GST process and absorbing of charges on digital transactions gives an ease to many industry verticals. Also, the plans of the government to restructure the national highways programme in order to create a network of highways for better connectivity and upgradation of 125,000 km of roads in next five years at a cost of INR 802.5 billion rupee should be emphasized. More focus to be laid on Swachh Bharat mission and expansion of railway suburban networks which we expect will boost inbound tourism.
Prashanth Rao Aroor, MD & CEO, Intellistay Hotels Pvt. Ltd
Last year the government made a significant effort towards supporting private tourism infrastructure by rationalizing the GST regime on hotels. As an Industry that contributes close to 10 per cent of both GDP and employment, and given the high capital expenditure and slow payback on assets, we would like to see the government extend infrastructure status to hotel and tourism projects built with 15 crore plus of investment giving access to better credit terms.
It would be nice to see a road map of the various public infrastructures announced for tourism and designation of some corridors as tourism corridors with last mile infra projects like we saw in Amritsar in the vicinity of the Golden Temple. The roadways, railway stations and airports on these corridors must have sufficient designated areas purpose marked for hospitality to provide incentive for Greenfield projects by private sector like we saw around Delhi Airport. This involves transparency, sensible commercial models and accelerated permissions. In order to subsidize capital cost of building for hospitality in cities, we may need to see additional development rights for plots marked suitable for hotel development and where infrastructure supports it. That allows hotels to compete for asset class feasibility against commercial and residential projects which are lower CAPEX products.
For an industry with high attrition rates on employment, there could be programs for fostering hospitality and tourism education, training and development. It’s time to setup a National Tourism Board and treat Tourism as a 'concurrent list' item to allow coordinated efforts across the country and stop states from hijacking tourism policy when they attempt social appeasement. Private parties, associations and eminent citizens will have a voice on this board and it will ensure public expenditure is result oriented and the states follow a common minimum program to be eligible for grants from the centre towards tourism expenditure. The board should be self-funded and provided with revenue streams to make it independent and effective. With some of these changes, India can begin to carve out its fair share of global travel and huge domestic potential of 65 per cent of Indians who don’t enjoy domestic tourism/travel/stays will be addressed. It will also make up for GDP shrinkage rising from slow down of manufacturing industry where we are over dependent on a few sectors which makes us sensitive to them.
Nalini Gupta, Head of Costa Cruises India
As India has one of the largest coastlines in the world, India’s potential for capitalising and benefitting from the cruise sector is high. Cruise holidays provide one of the best options, for exploring destinations as they are a hassle free, good value for money and an all-inclusive holiday. Further the novelty of cruising still exists in India, as only a very small percentage of Indians have explored this form of holiday. If the government has clear cruise friendly policies and practises, it would encourage the international cruise liners to invest in India benefiting the blue economy of the country. Infrastructural developments at par with international standards will further progress the growth of tourism in India. Successful implementation of these initiatives would generate revenue for locals, employment in country and would also boost foreign and domestic tourism.
Varun Chadha, CEO, Tirun
The government has recognized the potential of cruising as an economic multiplier and is catching up with the world in terms of policies and infrastructure. Cruise Lines are now looking at the government to create a relatable tax regime, which is at par with the rest of the world.
Indroneel Dutt, CFO, Cleartrip
Since the past decade, India has established itself as one of the fastest-growing travel markets across the globe and is poised to become the 3rd largest market by 2025 given the secular growth trends. It is essential to ensure that infrastructural inadequacies do not fetter the growth of the industry. The government should make provisions for boosting the domestic infrastructure towards global benchmarks in the upcoming budget. We are also hopeful that the government will take cognizance and resolve challenges for the aviation industry which has already seen a tough year in 2019. For one, out of all the stakeholders in the aviation ecosystem, airlines operate with the most paper-thin margins. This, coupled with TCS (Tax collection at source), ends up hampering the working capital of airlines, giving rise to numerous operational difficulties. These obstacles are not only affecting the stakeholders and service providers but the consumers as well. We are optimistic that the government will continue to be open-minded and maintain the impetus of its past initiatives while bringing necessary reformations to further enable the travel sector.
Amit Damani, co-founder, Vista Rooms
The government's decision to reduce GST from 28 to 18% and 18 to 12% a couple of months back was a great step forward for the Hotel Industry. We hope further steps are taken to promote local tourism within India. This requires a national campaign on the lines of Incredible India with a focus on domestic traveller's.
Anil Kumar Prasanna, CEO, AxisRooms
For hospitality industry there has been a great relief from GST which is still higher compared to the tourism economy countries but it is still a breather from some cuts provided. B2B business are struggling on GST payments, as most money has to be paid from 20 days of invoice, though some enterprise customers have delayed payment cycles from minimum 30 days extending to 180 days. Hence, technically lot of business are funding through their personal savings, loans to pay the GST and awaiting their invoices to be cleared by customers. It would be great help if this can be deducted more like income tax from the payees especially in B2B segment, where delayed payment cycles are seen, this would ease the cash flow to the economy or some liability policy for the delay in invoice payments for merchants selling services or goods would be a great leverage for the economy. For travel & hospitality Industry, we need to take some cue from Thailand as their currency is the most robust compared to all Asian currency for 2019 due to the policy worked upon many years to bring in revenue from tourism and hospitality sector, in fact it appreciated their local currency by 6 per cent against the USD.