Pre-Budget expectations for India's hospitality industry

India's robust USD 24 billion hospitality sector, fuelled by increasing disposable income, and the government’s commitment to tourism infrastructure development combined with India’s success at hosting global events like G20 and ICC Cricket World Cup has captured the attention of global brands and investors. Some leading hospitality players are all set to open a record number of properties across the country. Ayodhya and Lakshadweep are anticipated to be the new trending destinations this year.

The nation is witnessing a surge in domestic tourism: ranging from weekend getaways and sustainable wellness stays to grand weddings and spiritual journeys, domestic travel is flourishing. Government initiatives like Swadesh Darshan, PRASAD, and the 'Dekho Apna Desh' campaign are driving this surge, reinforcing the foundations of domestic tourism.
Expectations from the finance minister in the interim budget

GST credit for hotel construction

The absence of GST credit for hotel construction poses a significant obstacle requiring urgent resolution to unlock the industry's vast potential.

Tax rationalisation and global competitiveness

A transformative reduction of GST from 18 percent to a globally competitive 12 percent is crucial for enhancing India's allure in international tourism. Aligning India's hotel taxes with neighbouring destinations like Singapore and Thailand (with tax rates between 5-7 percent) is pivotal for enhancing India's competitiveness in the global tourism market, particularly for inbound travellers.

Infrastructure industry status for hotels

Granting hotels the status of an infrastructure industry, akin to highways and ports, is essential for fostering self-reliance (Atmanirbharta) and promoting local investments. Recognising hotels as integral contributors to tourism infrastructure comes with numerous advantages, including reduced utility tariffs, lower property taxes, facilitated access to finance, softer loans, and streamlined business processes. These collective benefits aim to substantially diminish the overall cost of doing business for the hotel industry.

Streamlining approvals for efficient growth

The hotel industry faces a cumbersome and costly challenge due to the need for numerous licenses. Streamlining this process by implementing a single-window system for all approvals, coupled with a time-bound framework, will significantly boost efficiency and economic viability. This simplification will foster swift progress and expansion in the hotel sector.

Continuation of eclgs for hospitality

The ongoing support through the Emergency Credit Line Guarantee Scheme (ECLGS) is crucial, ensuring the hospitality sector's resilient march towards recovery and growth.

Enhancing air travel accessibility

Reducing the Aviation Turbine Fuel (ATF) cost back to its pre-pandemic pricing of INR 65,368/KL from the 2023 rate of INR 103,189/KL holds immense potential for India's air travel industry, serving as a critical lever to enhance air travel accessibility. Such a reduction is poised to be a game-changer, reinvigorating the tourism sector, and energising the Indian economy.

Incentives for sustainable practices

Green is the new gold! Incentivising eco-friendly initiatives with India's commitment to UN Sustainable Development Goals places India as the responsible tourism champion dedicated to a sustainable tomorrow.

Equalising regulations for online travel agencies

Addressing inequalities in Online Travel Agencies (OTAs) and payment methods is crucial for a fair digital tourism landscape. Balancing GST charges for e-commerce bookings and the imposition of TCS (Tax Collection at Source) for India-based OTAs are crucial to maintaining a level playing field for all stakeholders. Moreover, the absence of GST or direct taxes for foreign OTAs operating within India creates a lopsided playing field.

To achieve this vision of fairness, a concerted effort is needed. The promotion of tourism will be championed as a mission, fostering collaboration among states, aligning government programs, and leveraging Public-Private Partnerships. Together, these actions will pave the way for a more just and inclusive digital ecosystem, empowering Indian OTAs and creating a level playing field for all stakeholders.

Looking ahead

The Indian hospitality sector is anticipated to have a promising 2024 and experience key innovative trends like redefining dining and accommodation for digital nomads, menu visualisation via VR, the rise of wellness and spiritual tourism, the launch of Hotel REITs, and a consistent rise in RevPARs.

This gap with other peers like China and Singapore underscores a golden opportunity for exponential growth and investment in India's hospitality landscape, setting the stage for an era of dynamic development and expansion.

Source: ET Hospitality World