There have been mixed reactions from the hotel industry regarding the budget, with disappointment being the prevailing emotion
The union budget announced last month has brought disappointments for the hospitality sector, whose long-standing demands for industry status and tax rationalisation, besides others, remain unattended. With a handful of positivity for hospitality sector, the government’s major focus in the budget was on infrastructure and revival of GDP growth.
Hoteliers say they feel dejected due to the government’s apathy towards the industry. “This year’s budget totally ignored the hospitality industry’s demands for granting infrastructure status to the hotel sector, and rationalisation of taxes. We are very disappointed because there was no mention of the tourism and hospitality sectors in the budget speech. We had expected a fair deal in the budget so that investors can come in a big way to develop the accommodation sector in the country,” said MP Purushothaman, president, FHRAI.
Even individual hoteliers feel that very little has been done for the industry, which contributes largely to foreign exchange earnings and employment generation. “The travel and tourism industry has been contributing a major pie to the GDP of India. We are largely dependent on the aviation industry, and airlines have not been given any relief by way of ATF reduction, which directly impacts air ticket costs and travel,” said Jaideep Anand, general manager, Ista Hyderabad.
Royal Orchid Hotel’s chairman and managing director Chender Baljee says they were hoping for some stimulus from the government as the industry is facing a tough economic condition. “Fund procurement is difficult for the sector, and we were hoping for some respite. As ‘brand India’ nosedives, we need to urgently take measures to reassure the world. A focus on building global confidence in the country and resuscitating the tourism and hospitality industries is crucial at this stage.”
Aditya Kamani, director, Zuri Group Global, said, “While we are pleased with the progressive outlook of the union budget, we feel that the hospitality sector has been, once again, denied the much needed support. In this critical period where the global economy is facing a meltdown, some of the reliefs like uniform luxury taxation, industry status for the hospitality sector, and relevant tax benefits would have been extremely beneficial to our sector.”
Purushothaman says the only silver lining in the budget is the abolition of Fringe Benefit Tax (FBT), which will help the hospitality industry to some extent; it will give a substantial boost to the MICE segment as corporates will be more open to conducting meetings and conventions at different locations.
Industry experts say some of the initiatives will have positive impacts on the hospitality and tourism sector. The Indian Infrastructure Finance Company (IIFCL) has been authorised to raise Rs100,000 crore for the development of infrastructure such as rail, road and airport. Further, increased allocation for National Highways Authority of India (NHAI) will mean improved and accelerated connectivity, raising the value of existing real estate along these routes. “The increase of funding for the Commonwealth Games will vastly enhance development potential in the Delhi-NCR region, and have direct positive implications for the hotel industry in this sector”, said Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj.
Best Western president for India, Sudhir Sinha, however, opines that the success of development of roads, highways, and railways will be felt only marginally, if the hotels (budget or otherwise), are not developed or incentivised. “The budget has given a complete miss to allocations for the hotel industry. This, in spite of India hosting many events of national as well as international importance.”
In this year’s budget, the government has fully exempted custom duty on water sport equipments. Minimum Alternate Tax (MAT), has been increased from 10% to 15%, on book profits. The custom duty has been increased to eight per cent from four per cent on specified food items. Liquor has been excluded from the ambit of Goods and Services Tax (GST), which means the price of alcoholic beverages will continue to vary across the country.
Though there is not much to cheer about in this budget, industry players are still upbeat about India’s growth potential. Many feel that the government’s much needed emphasis for reaching a nine per cent growth target will create strong domestic demands in the long run. ”There have been mixed reviews on the budget but I think a growth rate target of nine per cent set by the budget is clearly a positive signal, given the weak macroeconomic condition existing globally”, said Anand of Ista Hyderabad.
