Budget 2021 recommendations for FY21-22 by the Hotel Association of India

Among the various service sectors, Tourism and Hospitality is the second largest contributor to the national GDP and employment growth after IT sector. The Covid-19 pandemic has had a devastating impact on the economy in general and the tourism and hospitality sector in particular. The Reserve Bank of India has recognized hotels as one of the most severely impacted sectors. Over 90% of the hotel rooms in India fall in the category of economy, budget and mid-market segments and serve mostly Indian travellers. In the current situation with almost no occupancy and revenue, about 70% of the direct jobs in the hotel sector are at risk as are millions of jobs in the hotel related support sectors. In fact, it is now estimated that about 40 percent of all hotels in India are on the brink of permanent closure

The hospitality business is likely to take two to three years’ time to bounce back to pre Covid-19 levels. Government’s support is crucial in speeding up return to normalcy of the hospitality industry at a fast pace.

This can be achieved through:

a) Formulation of pragmatic policies
b) Rationalisation in tax rates
c) Easy compliances and ease of doing business

It is against this backdrop that Hotel Association of India (HAI), the apex body of the Indian Hospitality Industry has submitted its suggestions to be considered by the Government in Union Budget of financial year 2021-22.

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POLICY RECOMMENDATIONS:

Infrastructure Status:

Hotels should be accorded the Infrastructure Industry Status. It is recommended to declare hotels of above Rs 25 cr Capex (excluding land) as infrastructure.

Power Tariffs at industry rates:

Hotels should be charged power rates applicable to Industries.

Increased License Timelines:

Increase license period to 3-5 years instead of annual

Liquor License for 5 Star hotels:

A single hotel license should be issued to serve liquor to hotels in 5* and higher category thereof. Relax and regulate liquor operation timings for 5-star hotels across India.

It is recommended that business losses be allowed to be carried forward for up to 12 Years instead of 8 financial years. Hotels incur business losses in the initial years of operations. Business and profitability improve after several years of operation. Most Hotels have carried forward business losses and the same were expected to be set off in the next few years with the surge in occupancy and ARR. However on account of the pandemic the revenues of hotels have plummeted without any proportionate reduction in costs. Hotels are therefore expected to post business losses for next few years. Extension of period to carry forward business losses will help hotels improve cash flows and ROI for the Industry as a whole.