HVS India – Indian Hotel Sector – Union Budget 2022: Successes and Failures for Indian Hotel Sector
This article highlights some of the key announcements from the Union Budget 2022 that will impact the Indian hospitality sector.
The 2022 Union Budget (Budget) can be summed up as a mixture of successes and failures for the Indian hospitality sector, which after two years of bearing the brunt of the pandemic was hoping for much-needed reforms to help accelerate the recovery. recovery of the sector. However, even though the 2021-22 economic study acknowledged that the “trajectory of tourism remains uncertain due to Omicron”, the budget did not give any direct and immediate measures to stimulate the sector’s recovery. While few of the recommendations made by industry stakeholders to government in various fora made it into the budget, most others did not.
On the positive side, the Emergency Line of Credit Guarantee Scheme (ECLGS) has been extended until March 2023 and the guarantee coverage has been increased from INR 50,000 crore (or INR 500 billion) to INR 5 lakh crore (or INR 5 trillion), with the complementary corpus exclusively dedicated to the hotel industry and related segments. The sector has often called for the extension of the ECLGS, and although this is only a short-term relief, the government’s positive response will boost the morale of the sector.
Ministry of Tourism funding for tourism infrastructure development, capacity building, marketing and promotion was increased by 18.4% from the previous year. In addition, a greater focus on large-scale infrastructure development under the PM Gati Shakti plan, with emphasis on roads, railways, airports, ports and waterways, will help not only the tourism sector to reach its full potential in the future, but also also contribute to economic growth. For example, the introduction of 400 new Vande Bharat trains over the next three years, as well as the development of 25,000 km of new highways this fiscal year, will improve last-mile connectivity to several tourist destinations in the country. Additionally, infrastructure development in North East India is a priority under the Prime Minister’s new Development Initiative plan for the North East, which aims to encourage growth in the region. Meanwhile, the planned development of eight new cable cars under the Parvatmala program as an eco-friendly alternative to regular roads will increase connectivity in hilly areas, which are experiencing high demand from tourists.
The introduction of chip-embedded electronic passports in 2022-23, in line with international standards, will enhance security and facilitate international travel for citizens by speeding up the immigration process. In addition, the significant 35.4% increase in investment spending should accelerate the country’s economic recovery and promote job creation, reviving business travel.
The government has also announced its intention to launch the next phase of the ease of doing business, which will include, among other things, the digitization of manual processes and the elimination of overlapping compliances and is expected to simplify approval processes, even for future hospitality projects. While these announcements will help the hospitality sector grow in the long term, the budget lost the opportunity to provide more direct assistance to the COVID-battered tourism and hospitality sectors, avoiding critical reforms such as granting infrastructure loan status to the sector or reducing GST rates on hotel rates to stimulate domestic travel, among other measures.
Mandeep S.Lamba, President – South Asia, oversees the HVS practice in South Asia. Mandeep has spent over 30 years in the hospitality industry having worked with international hotel companies such as Choice Hotels, IHG and Radisson Hotels before becoming President of ITC Fortune Hotels in 2001. After successfully building the Fortune brand in medium-sized hotel sector in India, Mandeep ventured on an entrepreneurial journey for over 8 years, establishing JV companies with Dawnay Day Group UK and Onyx Hospitality Thailand before joining JLL in 2014, as Managing Director, Hotels & Hospitality Group – South Asia. A recognized industry leader, Mandeep has won several awards and accolades for his accomplishments. Recently, it was featured in the Hotelier India Power List of India’s Most Respected Hoteliers for the second consecutive year. Contact Mandeep at +91 981 1306 161 or [email protected]
Dipti Mohan, Senior Manager – Research with HVS South Asia, is a seasoned knowledge professional with extensive experience in creating research-based content. She has authored several “point of view” papers such as thought leadership reports, expert opinion pieces, white papers, and research reports. Contact Dipti at [email protected]