The expectations from the upcoming 2022-23 Union Budget are crucial for the domestic hospitality industry — which has been one of the worst-hit segments of the economy. Industry observers are hoping it will facilitate the evolution of the industry to make it more resilient.
“The entire hospitality industry is hanging by a thread and only a special relief package can reinvigorate the industry," Gurbaxish Singh Kohli, vice president, Federation of Hotel and Restaurant Associations of India (FHRAI), tells a business daily.
The devastating Delta wave in early 2021 was a lethal blow to the domestic hospitality industry in India — declining by over 65% in 2021, according to one estimate. It accumulated a loss of revenue worth ₹1.3 lakh crore in fiscal 2020-21. It contracted by 47% in April-June 2020, as per data released by the National Statistical Office (NSO). The hotel industry, in May 2020, experienced an occupancy decline of 77% over the same period in 2019.
Srijan Wadhera, the general manager of the Conrad Hotel in Bengaluru, expects that the budget will catalyse the industry to a new dawn for the hospitality industry. “I am personally hoping that the government starts initiatives towards measures to boost domestic tourism, support necessary technological developments and we look forward to government initiatives supporting skill development and policies that are growth centric this year,” he tells Fortune India.
The Federation of Hotels and Restaurants Association of India (FHRAI), in December 2021, submitted a list of recommendations to the finance ministry, outlining some of the measures the government should take in order to revive the debilitated industry.
The apex body expects the inclusion of hotels and tourism related sectors in the National Infrastructure Pipeline (NIP) — set up under the Development Financial Institution (DFI) by the Ministry of Finance — for promoting infrastructure funding. “This will enable the Covid-19-hit hospitality sector to avail funds with extended repayment periods at a low rate of interest,” says Kohli, elucidating that the hotel industry is a long gestation industry which incurs losses in the initial years of operations and profitability improves only after a few years.
Consequently, most hotels carry forward business losses — expecting to set them off over the coming years. However, the entire industry’s profitability took a massive hit due to the unprecedented conditions brought by the pandemic, and businesses are looking at prospective losses for the next few years. “This may result in hotels being unable to set off past business losses within a period of eight years, adversely impacting cash-flow and return on investment (RoI),” adds Kohli.
The Hotel Association of India, in its official statement, has remarked, “It is critical to protect the industry during such prolonged periods of flip-flop in business prospects. Access to softer funding, longer periods to repay loans, resultant shortening of the gestation period will make hotel investments more attractive and sustainable. More hotels would mean more jobs, more development.”
It believes that 'infrastructure status' for the industry will also enable hotels to avail benefits of lower taxation, utility tariffs and a simplified approval process for projects. “Additionally, the road to recovery can also be aided through measures like an extended moratorium, rationalisation of taxes and facilitating ease of doing business,” the statement adds.
Currently hotels built with an investment of ₹200 crore or more have been accorded infrastructure status. Kohli believes that the threshold has to be brought down to ₹10 crore per hotel to give fillip to hotels in the budget segment. “This will enable hotels to avail term loans at lower rates of interest and also have a longer repayment period,” he adds.
Currently, the government is providing free loans to MSMEs to help them deal with the pandemic-induced crisis and revive the economy, including the hospitality and tourism industry. In October last year, the government announced plans to resume inbound tourism from November 2021 — which is touted to lend a major boost to the tourism sector in India. It introduced a scheme to boost the tourism sector by providing a one-month free tourist visa to 5 lakh tourists until March 2022.
Despite the unprecedented disruptions brought by the pandemic, the travel market in India is projected to reach $125 billion by FY27 from an estimated $75 billion in FY20, according to a report by the Indian Brand Equity Foundation. “India offers geographical diversity, attractive beaches, 37 World Heritage sites, 10 bio-geographic zones, 80 national parks and 441 sanctuaries,” the report reads.
