HVS Monday Musings: Indian Hospitality Sector’s Union Budget Wish List, 2022-23
COVID-19 and the resulting travel restrictions have wreaked havoc on the travel and hospitality industries around the world. To mitigate the impact, governments around the world have taken a variety of actions over the past two years, ranging from prioritizing the vaccination of tourism workers to providing financial and liquidity support as well as changing policies to help resume their respective travel and hospitality. sectors. In fact, with low demand for international travel, the governments of some countries like Singapore, Hong Kong, Slovenia, Switzerland, and Thailand have even introduced incentives and refunds to encourage citizens to travel within their own countries.
The sector’s long-standing demand for infrastructure loan status for the Indian hospitality sector, regardless of project cost, is foremost on our wish list. Infrastructure loan status will allow for a longer repayment term and lower borrowing rates, which will not only go a long way towards improving the health of the sector, but also attract substantial new investment. This will encourage hotel development, especially in several offbeat leisure destinations and Tier 2 and Tier 3 cities across the country, where growing travel demand is hampered by a lack of adequate good quality hotel supply. Creating a one-stop-shop approval system for all hotel projects across the country, as well as providing guidelines to reduce the disparity in regulatory processes between states will also facilitate hotel development in India.
Second, granting industry status to the sector will help hotel establishments enjoy certain benefits such as reduced electricity and water charges, lower property and development taxes, among others. This will help reduce operating costs for hospitality players, as industry rates are significantly lower than the commercial rates these businesses are currently paying.
In the absence of inbound travel, domestic tourism has been driving the sector’s recovery and will continue to do so for some time. Therefore, the government should consider strategies to incentivize domestic travel. Tax exemptions and a lower GST rate on hotel rates will help boost domestic travel in India, making the sector more competitive with Asian peers like Singapore and Thailand in the long run. The extension of the credit guarantee system and the implementation of a uniform national travel guideline will also help the sector to resist the tsunami which continues to cause damage.
Mandeep S Lamba
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