COVID-19’s impact on the travel and hospitality industry globally is well documented and discussed. Pre-pandemic, the industry’s contribution to GDP was around 10% annually, with a potential to take it higher.
In the backdrop of the Union Budget, Saurabh Rai, Executive VP, Preferred Hotels & Resorts explains how the entire travel and tourism ecosystem needs to come together to rebuild and recover. He especially noted that governments worldwide must do whatever it takes to encourage and not restrict travel.
What are your top three expectations from the Budget 2022-23?
The Government of India has done well to support the industry by allowing inbound travel since November 15, 2021. It’s also highly encouraging that the Government has committed to issuing tourist visas free of charge – either 5 lakh in all or until March 31, 2022 – whichever is earlier. Such measures to support the recovery would go a long way.
As regards the Budget, the need of the hour is to make things conducive for the entire travel and hospitality fraternity – be it the owners, promoters, operators, brands, sales and marketing partners and any other allies or related businesses. At the cost of sounding repetitive, the government must consider granting ‘Industry Status’ to our sector, as it enables legal and procedural benefits such as capital and interest subsidies, aiding large investors to be financing partners, allowing developers to refinance their existing debts and single window/fast track clearance processes for licenses, along with certain exemptions or relaxations from duties etc.
There is a huge need for us to diversify and come up with more travel itineraries/circuits around the country. There must be more gateway cities, we need to build more international airports, bring more investment in tier 2 and 3 cities and untapped destinations with potential, and incentivize developers to build hotels and resorts in those markets. Â
Another critical initiative would be to continue to incentivize people to travel domestically and make programs like ‘Dekho Apna Desh’ a resounding success. For example, one of the considerations could be to enhance tax benefits on LTA allowance for at least the next 3-5 years.
What about tax benefits for promoting sustainability in the sector?
The Government can definitely provide this in the form of credit for hotels that are helping with practising responsible tourism. Taking Preferred Hotel Group’s sustainability-focused hotel brand ‘Beyond Green’ as an example – we are able to surely support our member hotels reach audiences looking for such experiences, however, the other bit of support to hotels really needs to come from administrative authorities in the form of encouragement through targeted tax and operational incentives.
Another aspect that needs to be looked into is the License fee, especially for large events. It should either be made adjustable (for example, in cases where New Year’s Eve events were cancelled at short notice), else should only be collected once the event has been successfully executed. Also, consider reduced licensing fees and structure it in a way so as to make it easier for the players to operate, given it is not really an elite industry on the inside. Introducing online options to acquire all NOCs, liquor licenses and other permissions in one go would be a great start.
What kind of fiscal contingency plans can the government earmark to deal with uncertainties that keep affecting this sector?
Contingency planning must focus on providing the financial resources necessary to keep travel and hospitality afloat during times of duress such as this. The last two years of experience has provided us with enough data, MIS and trends, for us to be better prepared going forward, to mitigate business risk and speed up the recovery process. Authorities must find ways to support, either by helping raise funds or by cutting costs due to drastic drops in revenues in times of crisis.
Another global phenomenon we’re witnessing is that of travel & hospitality talent pool moving away from the industry – both, experienced as well as fresh graduates. This trend is yet to be witnessed more strongly in India, and the need is to arrest it before that happens. This can perhaps be done by incentivizing industry employees not just by way of aligning pay scales and work hours, but benefits built into the tax structure. In FY 2020, 39 million jobs were created in the tourism sector in India, which was 8% of total employment in the country, and the priority or challenge is to actually retain most of this talent.
How can the Budget address some key policy decisions related to GST to make it more uniform and offer more fiscal reprieve to the industry, including credit transfer within group companies or credit trading?
It is well established that the implementation of GST has helped the lodging industry by largely reducing costs for end-users as well as by bringing in clarity & consistency. However, we are not at par when compared with global rates. As an example, Japan and Singapore have very low tax rates for their hospitality sector (8% and 7% respectively) which is probably one of the reasons for them ranking higher on tourist wish lists.
Moreover, streamlining tax structure across the board is key. While the taxation on accommodation part has been made uniform, other areas like F&B and other ancillary services remain to be worked upon. For example, alcohol sales are managed by State Governments and owing to the local licensing fees and a range of state controls, the pricing in most cases is prohibitive thereby directly influencing the sales negatively. Each of the states and union territories in India has adopted different approaches when it comes to taxing and regulating liquor and that doesn’t help the industry at large.
Making claiming input credit easier is another such manoeuvre that can help offer more fiscal reprieve. Additionally, as we embrace technology to provide safer, more hygienic and yet seamless experiences, it would be greatly beneficial to have a more friendly tax structure & custom duties to encourage faster adoption of tech and automation.
